China Abolishes VAT Exemption for Retail Sales of Investment Gold

The Government of the People's Republic of China, represented by the Chinese Ministry of Finance and the State Taxation Administration, announced that—effective November 1, 2025, according to economic media—it has canceled the exemption that was granted to retailers allowing them to deduct Value Added Tax (VAT) when selling investment gold or gold purchased from the Shanghai Gold Exchange (SGE).

The decision represents a structural change in the treatment of gold in the world's largest consumer market for bullion and jewelry, raising a series of questions within the precious metals sector about its local and international repercussions.

Financial and Economic Pressures

China is facing a relative slowdown in economic growth, a slump in the real estate sector, and pressure on domestic revenues. In this context, the Ministry of Finance has sought to broaden the tax revenue base by reviewing existing tax privileges, and gold was one of the targeted sectors. The decision constitutes an element of "geo-economic" taxation within the context of broader reforms.

Curbing Investment Demand and Speculation

The Chinese bullion market has been experiencing a "strong" buying wave for gold—often as a savings tool and a hedge against the depreciation of the Yuan or expected high inflation. This demand has pushed gold prices in China and globally to record levels. Tightening the tax treatment is a way to contain some individual speculation and reduce pressure on the local market.

 Rationalizing the Internal Market Structure

The decision establishes a clearer separation between "investment gold" and gold used in jewelry or industry. Authorities seek to direct domestic demand toward industrial and consumer uses, while reducing direct support for investment pools that are viewed as a source of exacerbating price jumps. This reflects a desire to make the "gold market" more stable and less volatile.

Content of the Decision

Before the Decision: It was a principle that "Standard Gold" processed at the Shanghai Exchange and meeting high purity specifications was exempt from VAT upon resale by retailers who had obtained the tax invoice from the SGE.

After the Decision, Retailers will no longer be allowed to exclude VAT when selling investment gold or when delivering it to the final consumer from the Exchange's vaults. Consequently, the final consumer will clearly bear the added tax on the gold price.

The decision applies upon "physical delivery" from the Exchange's vaults to the final consumer or when equated in the form of bars, coins, or investment products. Internal trading within the Exchange or between members may remain exempt or subject to less explicit treatments.

The decision has not yet indicated a direct change to exemptions for gold used industrially or in jewelry—but the Ministry's text guidance points to "regulating gold investment" and distinguishing between uses.

Expected Impacts on the Chinese Market and Consumers

Direct Impact

Actual Cost Increase: Chinese consumers purchasing investment gold bars or coins will now face a higher price than before, due to an additional tax that was previously exempt.

Pre-emptive Buying: Some stores in China announced price increases or temporary suspension of investment gold product sales before the decision was implemented, as a precautionary measure to avoid sudden tax losses.

Short-Term Slowdown in Individual Demand: Individual purchases of small gold investments, a driver of rapid local price increases, may decline.

Indirect Impacts

Potential Shift in Demand to the Informal Market: Some investors may resort to informal channels or across border regions such as Hong Kong or Singapore to avoid the new tax, posing a regulatory risk.

Adjustment in Local Price Premiums Compared to Global Prices: With the increased cost of local transport and sale, the premium (the local price over the global price) may temporarily decrease, which could alleviate some upward pressure on the global price.

Signal to Global and Institutional Investors: The decision is a message that China intends to regulate the investment bullion game, which could affect global expectations for its behavior as a major consumer.

 Global Impact on Gold and Bullion Markets

As the world's largest consumer of gold, any change in China's tax policy is a fundamental factor that must be considered when analyzing the global gold market.

In the short term, the slowdown in individual Chinese demand may lead to a temporary "cooling" of the sharp ascent in prices, but this does not imply a long-term decline, especially if institutional demand (central banks, sovereign entities) remains active.

For analysts, the decision reinforces the idea that future price rises are not guaranteed at the same speed as in previous years, and that the market may enter a phase of "high stability" rather than a sharp surge.

China's decision to cancel the tax exemption on investment gold is considered a significant turning point in the global bullion market. It expresses the country's desire to regulate local demand, enhance revenues, and distinguish between investment and consumer uses of gold, while potentially reducing short-term individual buying momentum in China.