China’s gold industry is entering a period of rapid adjustment after Beijing implemented a major overhaul of value-added tax (VAT) rules on physical gold.
The reform, which took effect on the first of November run through December 31, 2027, ending the long-standing practice of allowing full tax deductions on most gold withdrawn from the Shanghai Gold Exchange (SGE) and the Shanghai Futures Exchange (SHFE).
Investment products, such as bars produced by commercial banks or gold ETFs trading on the exchanges, remain largely unaffected. But once gold exits the vaults, the treatment diverges sharply.
For investment products, the taxation formula still applies only to value added, preserving the low-cost structure for banks and major investment channels. But the new system bars SGE members from issuing special VAT invoices to the clients they supply, meaning downstream buyers cannot claim tax credits on their own sales.
That dynamic will likely push more investors to buy directly from SGE members, whose products can be sold at lower effective prices because they retain the credit advantage at the first tier.
Jewelry sector faces brunt of policy changes
However, the impact on non-investment gold — primarily jewelry — is far more pronounced.
Members withdrawing gold for fabrication can now deduct output VAT by only 6 percent of their costs, rather than 13 percent previously. The SGE will also issue ordinary invoices instead of special ones, removing another layer of tax offset.
MSN