Russia wants to make gold tax-free?

The Russian Ministry of Finance is considering scrapping the tax on investment gold, the Russian newspaper reports Izvestia. Currently, gold bars are taxed with 20% VAT in Russia, making it uninteresting for individuals to buy gold. The tax you pay when you buy is not refunded when you sell, so you lose part of the investment immediately. By scrapping the tax on gold, it suddenly becomes interesting to buy gold.

According to figures from the World Gold Council, barely 3 tons of investment gold is sold in Russia. If the tax is lifted, the market for the precious metal could grow to 50 to 100 tonnes. This should give a strong boost to the global demand for gold coins and gold bars. The Ministry of Finance announced that the tax on gold jewellery will continue to exist.

Incentivising Russians to buy gold

There are several reasons for Russia to implement this measure. Not only does it give consumers the opportunity to invest in precious metals, it also gives a boost to the gold sector. Russia has the third largest gold mining production in the world, but cannot always sell the precious metal abroad.

One of the smelters in the country lost its LBMA status in 2018, because the smelter is owned by a person who is on a U.S. sanctions list. The possibility that more economic sanctions will follow in the future makes it Russia useful to strengthen domestic demand for gold. Smelters will then be able to use almost the entire production capacity for the domestic market.

According to Andrei Shemetov of Sberbank, the precious metal is an interesting alternative to traditional dollar investments due to the increasing geopolitical risks in the world. He expects the demand for investment gold to rise to 50 to 100 if it is tax-exempt. Alexey Panferov of Sovcombank told Izvestia that this measure is an important step towards dedollarization.