Gold has a long history of cultural significance in Asia. It has been used in ornaments, fabric, and jewellery. Today, gold not only plays an essential role in our cultural society but our economy, too.
In recent years, Asia has seen the greatest increase in demand for gold. As a result, more than 70 percent of global physical gold bar investment is done in East Asia and the Indian subcontinent.
Just like any other asset, gold is governed by an array of taxes during the buying and selling processes. Fledgling investors looking into investment assets will need to understand their region’s relevant tax regulations to avoid running afoul of financial authorities.
Tax laws and other rules for gold investments depend on the country you reside in, the type of gold investment, and how long you hold onto your assets. Here is a guideline on taxes according to different countries that can help you decide on gold investment.
Taxation of gold bullion in the US
The Internal Revenue Services (IRS) refers to gold as “collectables” for income tax purposes.
Holding gold in all forms, be it bullion coins, bars, ingots, or digital gold, subjects you to a capital gains tax. As an investor in the US, you will incur capital gains tax only after selling your gold and if collectables are held for more than a year.
Additionally, there are two different capital gains tax for physical holdings in gold—short-term capital gains and long-term capital gains. Short-term capital gains are collectables that you own for less than a year. These short-term gains are taxed at your ordinary income rates.
On the other hand, owning collectables for more than a year is treated as long-term capital gains. Taxes for your long-term capital gains are equal to your marginal tax rate, capped at a maximum of 28 percent. To sum it up, individuals in the 33 percent, 35 percent, and 39.6 percent tax brackets would only have to pay 28 percent on their holding sales.
Taxation of gold bullion in India
Your physical gold investments are first subjected to a 3 percent Goods and Services Tax (GST) in India. Afterwards, you are required to pay one of two different types of capital gains taxes.
To qualify for short-term capital gains, you must sell your gold within three years from its purchase date. Short-term gains are taxed as per your applicable income tax slab rate and added to your annual income.
On the flip side, anything sold after three years from the purchase date of your gold are considered long-term capital gains. Long-term gains incur 20 percent taxes. On top of that, 4 percent cess and indexation benefits will be imposed. In other words, your gold’s purchase price is adjusted for inflation.
Digital gold carries the same income taxation as physical gold, and the amount you are taxed also depends on how long you hold the gold in your portfolio. The main difference between digital and physical gold is that you do not need to pay taxes for your short-term capital gains.
Long-term capital gains on digital gold still require a 20 percent tax on returns along with any surcharge and a 4 percent cess. Keep this in mind when purchasing digital gold.
Taxation of gold bullion in Singapore
Singapore plays a vital role in the gold market in ASEAN due to its world-class infrastructure for gold storage and trading. Since 2012, Singapore has exempted its 7 percent Goods and Services Tax (GST) for investments in precious metal bars and coins. In addition, there are no other taxes charged, such as capital gains tax or import and export tax.
In Singapore, you do not have to report your physical gold sales, making investments in precious metals tax-free and hassle-free.
On top of that, purchasing gold in Singapore ensures your gold is safe and secure due to its strong law and effective judicial system. As such, these factors have favoured Singapore to be a trading, storage, and transport hub for gold.
Besides physical gold, digital gold investment is another favourable alternative among the younger generation due to its convenience and affordability. Furthermore, digital gold investment is tax-free in Singapore, making it even more sought-after.
Taxation of gold bullion in ASEAN countries
Taxation on gold varies across different ASEAN countries. Like Singapore, the countries of Malaysia, Cambodia, and Thailand do not tax gold.
Other ASEAN countries such as the Philippines have a 5 percent withholding tax and a 2 percent excise tax, adding up to a 7 percent import duty and a 12 percent Value-Added Tax (VAT). Meanwhile, Indonesia has a 5 percent import duty and a 10 percent VAT on gold, while Brunei has a 15 percent import duty.
Ready to begin your gold investment journey?
Gold is the perfect asset to start with if you are new to investing, as you do not require a large amount of money to begin. The gold market is also not as volatile as other investments such as stocks, making it safer to invest in.
There are many online trading platforms available to start your gold trading. Everest Gold is a convenient platform that allows you to trade anytime and anywhere through their app. The gold you buy on the app is backed by real physical gold, yet secured and insured by Everest Gold—taking much of the worry off your hands.