Editor’s Note
This article discusses a significant policy shift in China, where authorities have revoked VAT deduction benefits for gold retailers. The change is expected to impact jewelers and small-to-medium enterprises in the gold industry.
Chinese authorities have revoked the long-standing value-added tax (VAT) deduction benefits for gold retailers, a move expected to impact jewelers and small-to-medium enterprises within China’s gold industry.
On Monday (November 3), shares of Chow Tai Fook Jewellery Group Limited plunged by as much as 12% in Hong Kong, while shares of Chow Sang Sang Holdings International Limited and Lao Pu Gold Co., Ltd. fell by at least 8%.
The Ministry of Finance and the State Taxation Administration issued an announcement regarding tax policies related to gold, effective immediately and valid until December 31, 2027. Under the new rules, the sale of standard gold by selling member units or clients through the Shanghai Gold Exchange or the Shanghai Futures Exchange is exempt from VAT. VAT is also exempted for transactions on the exchanges where no physical delivery occurs.
For physical deliveries out of the exchange system, the policy distinguishes between investment and non-investment purposes for standard gold. Different VAT policies apply accordingly: either an immediate levy-and-refund policy, or an exemption from VAT combined with a policy allowing the buyer to calculate input tax at a 6% deduction rate—lower than the previous 13%.
This means investment gold purchased through the exchanges and held within the system remains tax-exempt. However, if gold is withdrawn for non-investment purposes (e.g., jewelry processing), the VAT benefits are reduced, increasing costs for businesses, with jewelers being the first to feel the impact.
This analysis comes from a Citigroup report cited by Bloomberg.
On the Taobao e-commerce platform, gold bar sellers appear to have already factored the additional tax burden into their prices, with most quotes exceeding 1,000 yuan per gram (S$182.9), higher than the benchmark price of around 900 yuan.