Tax Considerations When You Invest in Physical Precious Metals
At BFI, we are often asked questions regarding taxation and the related reporting requirements. Clearly, the level of privacy that citizens used to legally enjoy has been greatly reduced with the arrival of regulations such as FATCA or, the European version thereof, AIE. However, confidentiality is not completely dead. When it comes to storing physical precious metals overseas, the following general considerations will generally apply.
As Chief Compliance Officer at BFI, it comes naturally to me to start off with a disclaimer: This is not tax advice. The information provided here is general and it is meant to give readers a basic understanding of the topic, as a starting point. For more in-depth information, be sure to contact a local tax advisor or give us a call at Global Gold or BFI. We’ll be happy to provide you with case-specific assistance and guidance.
The first and most important tax consideration is related to understanding which tax regimes may apply. Generally, you need to consider the tax regulations of your home country and those applicable to the jurisdiction you are holding your metals in.
In the following video, Frank Suess touches on the issues I’m summarizing here, in a concise and practical way:
Rules applicable to the investor’s tax domicile or residence
Most jurisdictions will have the following tax rules:
Income / Capital Gains: Most jurisdictions will expect you to pay capital gains tax on the profits you make when you sell your precious metals. For this reason, it is advisable to keep all the relevant information and documentation of the transaction when you acquire the metals in question. At BFI and Global Gold, we keep this information for you, should you buy your metals through us. Even if you can’t find the original documentation, most tax jurisdictions provide for methods to deal with that. Your local accountant or tax advisor should be able to guide you through the process.
Tax Reporting: Generally, no tax will apply to the value of the metals you hold in storage. Very few jurisdictions levy a wealth tax on holding assets. Nevertheless, many jurisdictions will still expect you to report any such assets. The most prominent example is the U.S.A. The US tax code requires taxpayers to report their precious metals under certain circumstances. Generally, if a US taxpayer does not have a bank account or other kind of banking / account relationship for the purpose of holding his physical metals, then those metals are not reportable. However, there are nuances to be considered. And, as is customary in the US, tax attorneys will hardly ever give you a clear and concise “yes or no” answer. In principle, when it comes to Global Gold storage services, we recommend that Americans report their precious metals if they hold it in collective storage. When it comes to segregated storage, the legal opinions can differ. To err on the side of caution, we recommend reporting there too. However, when it comes to Key Box Storage, the advice we have received is that such holdings are not reportable. In this context, it is important to highlight that not reporting your stored metals does not exempt you from the capital gains tax mentioned above.
Taxation applicable to the vaulting location: Certain taxes and customs rules may apply to the location in which you store your physical metals. Many jurisdictions levy taxes on precious metals. In Germany, for instance, a 19% value added tax (VAT) is levied on physically delivered silver in Germany, 7% on certain types of gold coins. In Switzerland, a VAT of 7.7% applies to white metals (silver, platinum, palladium) delivered physically into Switzerland. No VAT applies to gold in Switzerland. Moreover, in the context of Global Gold, all such local taxes are avoided by the nature of the setup. That means that no matter where in the world you store with Global Gold, no VAT or other taxes apply. As long as you keep your metals in the program, or if you buy and sell your metals within the Global Gold program, no such local vaulting or value added taxes will apply.