For all that gold: deposits in precious metals will make them more attractive

The authorities plan to abolish VAT on interest on deposits in precious metals. This bill was supported by the Cabinet of Ministers and approved by the Board of Directors. The measure is needed in order to make investments in such instruments more attractive — the value-added tax is transferred by the bank, but it is already included in the cost of the service, so in fact it is the client's expenses. Therefore, VAT exemption can increase the investor's profitability. It may grow by 20% while maintaining current metal prices, experts predict.

VAT on interest on deposits in precious metals will be abolished

The authorities decided to increase the attractiveness of deposits in precious metals. The government has supported a bill that exempts banks from paying value added tax (VAT) when they charge interest on such deposits.

The explanatory note to the bill clarifies that one of the ways an investor can use gold bars is to provide them to banks as a deposit against the client receiving a certain percentage. But if we talk about income from ordinary deposits, in rubles or foreign currencies, they are not subject to VAT.

"In order to create equal economic conditions and increase the attractiveness of deposits in precious metals, the taxation of VAT on interest on deposits in precious metals should not differ from the taxation of interest on other types of bank deposits," the explanatory note says.

In practice, banks usually do not transfer VAT on these transactions anyway, the lawyers explain. The thing is that this provision in the legislation is formulated too generally, explained Maria Mitrofanova, CEO of Your Personal Accountant LLC, a member of the Moscow Chamber of Tax Consultants. Ambiguous formulations left the ground for the claims of the tax authorities, which turn into very expensive lawsuits.

Vladimir Chernov, analyst at Freedom Finance Global, explained: on the one hand, interest on deposits is not considered a sale and is subject to taxation. On the other hand, after income is paid, the amount of metal on the deposit increases, and this can already be regarded by the tax authorities as the sale of goods that are subject to VAT.

According to Vladimir Gruzdev, Chairman of the Board of the Russian Bar Association, the initiative is designed to put an end to tax and legal disputes arising from the need for banks to pay this tax. The Board approved the initiative. This information was confirmed to Izvestia by sources in the Cabinet. The editorial board also asked the Bank of Russia if they supported the initiative.

In practice, the innovation means that bank customers holding funds in gold or silver will not have to spend on VAT included in the interest, and the banks themselves will be spared the risk of claims from the tax service, explained CEO Maria Mitrofanova.

How to make money on precious metals

Today, there are several ways to make money on precious metals. The first is the purchase of gold bars with the possibility of subsequent sale and making a profit on the price difference. The second is the opening of impersonal metal accounts, where the principle of profit—making is the same, but the account indicates only the weight of the metal without specifying the number of ingots, samples and manufacturers or deposits. Another option is to make a deposit in bullion itself.

In the first case, in order to increase the attractiveness of operations, the government abolished VAT for individuals back in 2022. This provided citizens with an alternative means of accumulating funds that does not have credit and currency risk. It also attracted additional investments in the gold mining industry and partially eliminated the shadow turnover of scrap and waste containing precious metals.

The measure to abolish VAT on interest payments on deposits in precious metals may increase the accessibility of investments in them for citizens, which is especially important in conditions of instability of the foreign exchange market. Eliminating the 20% tax from the entire chain will make transactions more profitable, stimulating savings in national currency and precious metals, said Vladimir Chernov from Freedom Finance Global.

If the law is passed, banks will no longer bear the cost of paying VAT and will be protected from disputes over interest payments. Investors, in turn, will retain more than 20% of their investments, which is equivalent to an increase in real profitability while maintaining current metal prices, Vladimir Chernov drew attention. Such estimates were confirmed by independent expert Andrey Barkhota.

However, the initiative can also be supplemented with measures to control the turnover of precious metals in order to avoid shadow operations, Vladimir Chernov noted.

In addition, to increase the attractiveness of metal accounts, it is necessary to provide additional options for depositors, Andrey Barkhota added. According to him, it is also necessary to convert metal accounts into gold bars or shares of gold mining companies after a certain period of time. In this case, they will arouse the interest of new groups of the population, the expert concluded.