Understanding tax Rules When Investing in a Precious Metal Market

Precious Metals MarketBeing an investor in physical precious metals, such as gold and silver, you should be aware of the premiums that needs to be paid, the tax rules you have to follow and other costs associated with your investment because the tax implications often create confusion among the investors. You should seek guidance of Your Personal Financial Mentor because he can help you resolve the whole tax related scenarios, identify the hidden opportunities & risk and also helps you devise strategies in order to earn long term gains in the precious metal market.

A rising trend of precious metal trading has been observed in the past few years and an investor prefers to invest in a precious metal market in order to diversify his portfolio. Gold coins and gold bars, such as ingots and bars, are not subject to sales or value added tax. However, there are some states in the United States and in Australia and Canada where items below a certain ratio of gold content is subject to sales tax. On the other hand, a completely different picture can be seen when it comes to investing in silver. Many countries in the world impose a huge substantial value added tax when an investor purchases silver.

But the main concern arises on the disposal of precious metal. With few exceptions, precious metal like gold and silver are considered investments like real estates, equities and bonds. Therefore, you have to pay capital gains tax (CGT) on any profit, you earn on disposal of precious metal, at a rate prevalent during a given time period. If you do not have a receipt of those gold bars or coins you bought many years, your basis will be considered as zero and all your proceeds will be subject to capital gains tax.

Don’t stress yourself too much! Because you can change your rate of capital gains tax by internationalizing your financial portfolio to a zero or minimum capital gains tax jurisdiction. You can reduce your CGT liability by offsetting capital losses against the capital gains you earn. Moreover, certain countries, such as UK offer specific capital gains allowances. Today, the UK is not considered as a precious metal friendly country. There is a 20% Value added tax on silver purchases and about 28% capital gains tax on the profit earned by selling gold or silver in a precious metal market. However, there are two major benefits for UK tax residents like capital gains allowance after allowing reliefs and losses are quite generous (which is a substantial advantage for smaller portfolios) and secondly, Britain and Sovereign coins are legally tendered and so, are CGT free.

Unfortunately, the UK is facing a weak financial condition and if another debt crisis hits the market, the UK government will have to reintroduce currency and capital control. British pound will be devalued and tax and control restrictions of the precious metal will dramatically increase. In order to protect yourself from these uncertain and high risk situations, you should take precautionary measure to protect your investment in a precious metal market. For example, you should strongly emphasize on storing gold and silver internationally, or buy a foreign property in a lower capital gains tax country and either change or prepare yourself to change your tax residency.


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November 8, 2013 Understanding tax Rules When Investing in a Precious Metal Market