Russia scraps tax on investment gold

Russia has this week private to abolish the tax on investment gold. Currently, individuals pay 20% tax on the purchase of Gold bars, a tax that will expire immediately. Due to Western sanctions, the government has decided to scrap the tax on gold. According to Russian Prime Minister Mikhail Mishustin, the precious metal is a good alternative to foreign currencies such as the euro and the dollar. Previously, Gold Coins already exempted from VAT in Russia.

This new measure has retroactive effect for all purchases of gold bars since the beginning of this month. This means that it is now much more attractive for the Russian population to buy investment gold. Finally, the price difference between the purchase and sale of gold bars has become much smaller as a result of the abolition of this tax. Russia follows the example of euro countries, where investment gold has been used since the introduction of the euro. Exempt from VAT. This is to promote the use of gold as a financial instrument.

Russia's going to buy more gold

Due to Western sanctions, the Russian central bank no longer has access to a large part of its foreign exchange reserves. In addition, the London Bullion Market Association (LBMA) recently granted the accreditation of six Russian smelters Withdrawn, which means that Russian gold is no longer allowed on the London gold market. In response to these Western sanctions, Russia has decided to review its strategy on gold.

For example, the central bank recently announced that well-known that it will buy gold again on the domestic market. With the outbreak of the corona crisis in the spring of 2020, the central bank temporarily paused its gold purchases. By scrapping VAT on gold bars, the government now wants to open up the domestic market for investment gold. As a result, Russian gold miners can sell more precious metals on the domestic market.

Alternative to euro and dollar

The government wants to promote gold as an alternative to the euro and the dollar, currencies that serve as a safe haven due to the depreciation of the Russian ruble. But due to Western sanctions on Russian banks, access to this foreign currency has been restricted. Making investment gold VAT-free is intended to prevent wealthy Russians from converting their savings into euros and dollars en masse. The VAT exemption for gold should also contribute to the de-dollarization of the Russian economy.

The government in Moscow expects that the domestic demand for gold will grow to 50 tons of gold per year as a result of this change in the law. That's about 15% of the domestic production of 330 tonnes. The rest of the precious metal will have to find its way to the central bank and markets abroad. Think of China and India, for example, but also countries in the Middle East.

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