Implications of VAT Reform in China's Gold Market
China recently announced changes to its gold market value-added tax (VAT) policies, effective from 1 November 2025 through 31 December 2027. These adjustments primarily affect how VAT applies to transactions involving physical gold.
Key VAT Policy Changes
- Members who buy and sell gold directly on the Shanghai Gold Exchange (SGE) remain exempt from VAT.
- Members withdrawing physical gold for investment purposes and then re-selling are not impacted by the new policy.
- However, members using the gold for non-investment purposes will face increased costs when redistributing it.
Market Impact
The higher costs for non-investment gold redistribution may create headwinds for demand in the Chinese gold jewelry market. Conversely, these changes could also spark innovation in this competitive sector.
Investment demand itself is not directly affected, but there could be a growing concentration of gold purchases through SGE members as a response to the new VAT rules.
Background on VAT Changes
The Ministry of Finance and State Taxation Administration of China introduced these adjustments following earlier VAT reforms. The last modification impacting gold was in April 2019, when VAT rates dropped from 16% to 13% across the board. The 2025 change differs, having a more targeted effect on specific gold market activities.
The Ministry of Finance and State Taxation Administration of China recently issued changes in the Chinese gold market tax policies, effective 1 November 2025 to 31 December 2027, mainly related to the VAT system specific to the gold market.
Last time VAT changes affected the gold market was in April 2019, lowering VAT from 16% to 13% across the board.
These recent changes align with simultaneous tax adjustments on platinum and diamonds that also took effect on 1 November.
Summary
This VAT reform reshapes costs and incentives within China's gold market, fostering potential challenges for non-investment gold users and possible innovation amid evolving competition, while leaving direct investment demand stable.
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