Zero-rating on gold VAT

Date: 21/05/1998

By Peter Chapman

EU MEMBER states are set to approve a zero-rating for value added tax on transactions in gold bullion and coins next week.

Diplomats predict that a meeting of national tax officials next Thursday (28 May) will set the seal on a deal to eradicate differences in VAT treatment across the EU. Their decision would then be rubber-stamped by finance ministers later this year.

The agreement is expected to combat distortions in the bullion market caused by the reluctance of some member states, including Austria, France, Germany and Luxembourg, to levy VAT as required under EU rules.

“The only real sticking point which remains is the definition of gold coins that are eligible for zero-rating. It's not a massive issue. It needs to be clear that only gold coins used for investment are zero-rated,” said one diplomat.

Under the accord, retail sales of collectable gold coins, rings, bracelets and other gold trinkets would continue to be taxed under existing rules.

Another sticking point, which now seems to have been resolved, was Luxembourg's original reluctance to compromise its banking secrecy laws. The Grand Duchy's concerns were sparked by provisions in the directive to enable traders to alert national authorities to suspicious transactions which could involve the laundering of 'dirty money'.

A spokeswoman at the London Bullion Association (LBMA), whose members dominate the European gold trade, said the accord would have a “positive though not dramatic effect on the EU market”.

“If it had happened ten years ago it would have made a big difference,” she said. “But since then a lot of investors have moved away from gold.”

She added that the effects of the zero-rating would be minimised in the UK since trade between two members of the LBMA or between members and non-members was not liable for VAT as long as the transaction did not involve physical delivery.