Important Facts of the News
- VAT on gold comes into effect from 1 November.
- New rule remains in force until 31 December 2027.
- Applies to transactions through Shanghai Gold Exchange and Shanghai Futures Exchange.
- VAT refund system for retail sellers selling gold for investment purposes has been removed.
- Members buying gold for non-investment uses such as jewellery manufacture can claim a 6% VAT refund on the invoice value.
- If an investor buys via the exchange for investment and takes delivery from the warehouse, the exchange will collect VAT and may issue refunds, but sales of that gold as coins or bars will not qualify for tax exemption.
- Reference weight phrase in original material: “1000g NET WT”.
- Policy expected to lower short-term consumer demand in China and may put downward pressure on global gold prices.
What Beijing changed and who it affects
From 1 November, China has introduced a value added tax on gold traded through its main exchanges. The levy will stay active until 31 December 2027 and covers trades carried out on the Shanghai Gold Exchange and the Shanghai Futures Exchange. A central change is the end of the VAT refund mechanism that retail sellers had been able to use when selling gold for investment purposes.
How the new mechanism works
Under the revised rules, exchange members who buy gold for non-investment ends, for example for jewellery production, remain eligible to receive a VAT refund. Such members may claim a refund amounting to six percent of the invoice value. For investors purchasing gold via the exchange and taking delivery from warehouses, the exchange will collect VAT and can issue refunds in certain cases. However, if that delivered gold is later sold as coins or bars, those sales will not receive tax exemption.
Immediate impact on domestic retail trade
Retail sellers who trade gold for investment will lose the previous VAT refund benefit. That change raises operating costs for these dealers and is likely to be passed on to buyers. Even when a customer purchases gold directly from the exchange without immediate VAT, any later sale or processing of that metal may trigger VAT liability.
Broader market implications
Analysts expect the measure to temporarily reduce consumer appetite in China, which is the world’s largest consumer of gold. A decline in Chinese demand could exert downward pressure on international gold prices. The policy is also likely to have the clearest effect on retail sales of pure gold bars and coins within the country.