How the New Gold Policy Affects Market Participants

Core Viewpoint

The core of this new gold policy focuses on the detailed management of physical gold delivery, clearly distinguishing between "investment purposes" and "non-investment purposes" for the first time, and adjusting the relevant value-added tax (VAT) details, overall encouraging on-site gold trading.

The new policy may affect the behavior of three types of gold market participants.

① Members and clients of the Shanghai Gold Exchange and the Shanghai Futures Exchange must strictly declare their purposes.

② Gold investors can reduce their tax burden through the exchange, guiding investment to shift to on-site trading.

③ The cost of gold for downstream businesses in the gold processing and retail industry may rise, and they may choose to indirectly pass on the costs to the retail end.

China's policy towards gold trading is to encourage marketization. Under this main thread, the recent gold tax policy can be understood with clear policy intentions: firstly, to guide gold trading towards on-site transactions, making trading more standardized and centralized; secondly, to enhance the transparency and regulatory effectiveness of gold trading; and thirdly, to strengthen the mechanism for diverting gold investment and consumption demand.

Main Text

The Ministry of Finance and the State Administration of Taxation issued the "Announcement on Tax Policies Related to Gold" (2025 No. 11), which officially came into effect on November 1, 2025, and will be implemented until December 31, 2027. The core of this new policy is to clarify the VAT details for standard gold trading conducted through the Shanghai Gold Exchange and the Shanghai Futures Exchange.

According to the announcement, when member units or clients trade standard gold through the Shanghai Gold Exchange or the Shanghai Futures Exchange, the seller of standard gold can enjoy VAT exemption benefits. In the physical delivery stage, it is distinguished between "no physical delivery out" and "physical delivery out": for "no physical delivery out," the exchange exempts VAT; for "physical delivery out," member units apply different tax policies based on the purpose of purchasing standard gold.

1. The Core of the New Policy is Detailed Management of Two Types of Gold Behavior

The core adjustment of the new policy mainly focuses on the detailed management of the physical delivery stage, marking a significant shift from unified benefits to classified management, clearly distinguishing between "investment purposes" and "non-investment purposes" for the first time.

The new policy clearly stipulates that,

Investment purposes include direct sales, as well as the processing and production of gold bars, gold blocks, gold ingots, gold coins, or legally issued gold currency with a gold content of 99.5% or above, approved by the People's Bank of China.

Non-investment purposes refer to situations other than investment purposes.

Firstly, if member units purchase standard gold for investment purposes, the VAT deduction chain is interrupted at the member sales stage.

"If the purchasing member unit directly sells the standard gold or processes it into investment-purpose gold products (excluding legally issued gold currency approved by the People's Bank of China) and sells it, they should pay VAT according to current regulations and issue a regular invoice to the buyer, and may not issue a special VAT invoice."

Secondly, if member units purchase standard gold for non-investment purposes, the tax input deduction ratio is reduced from 13% to 6% The exchange is exempt from value-added tax and issues ordinary invoices to the buying member units based on the actual transaction price. If the buying member unit is a general taxpayer for value-added tax, the input tax amount is calculated based on the amount specified on the ordinary invoice and a 6% deduction rate. If the buying member unit processes standard gold into non-investment gold products and sells them, it must pay value-added tax according to current regulations and can issue special value-added tax invoices to the buyer.

Thirdly, a strict usage management mechanism effectively prevents tax arbitrage behavior.

If a member unit changes the actual use of standard gold purchased from the exchange after physical delivery, it must report to the exchange before the change in use and submit an application for the change within 6 months, and only one application for changing the use is allowed.

This mechanism effectively prevents tax arbitrage behavior.

II. The policy intention is to guide on-site trading and regulatory transparency

The new policy maintains the tax preferential status for on-site trading at the Shanghai Gold Exchange and the Shanghai Futures Exchange after the comprehensive marketization of the Chinese gold market, allowing the sale of standard gold to continue to be exempt from value-added tax, thus preserving the basic framework of tax incentives for gold trading.

The evolution of China's gold tax policy is closely related to the reform of the gold market system. After the founding of New China, China implemented a planned management model of "unified purchase, unified distribution, and unified management" for gold, with production, sales, and processing strictly controlled by national plans. During this period, the gold tax policy mainly served the national reserve strategy, and the tax incentive policies were relatively simple and direct.

The 1994 tax reform initiated the market-oriented exploration of gold tax policy. On April 27, 1994, the Ministry of Finance and the State Administration of Taxation issued a notice regarding the exemption of value-added tax on gold production links, approving the exemption of value-added tax for gold produced and sold by gold mines (including associated gold mines) and smelting enterprises until the end of 1995. On December 24 of the same year, the Ministry of Finance and the State Administration of Taxation jointly issued a notice to adjust the consumption tax rate and tax collection links for gold and silver jewelry, reducing the consumption tax rate from 10% to 5% starting January 1, 1994, and changing the collection of consumption tax on gold and silver jewelry from the production and sales link to the retail link starting January 1, 1995.

The establishment of the Shanghai Gold Exchange in 2002 marked the entry of the Chinese gold market into a fully market-oriented stage. Approved by the State Council, the Shanghai Gold Exchange, established by the People's Bank of China, officially opened on October 30, 2002, marking the end of over 50 years of planned control in China's gold industry. To achieve a smooth transition of gold from planning to market, the Ministry of Finance and the State Administration of Taxation clearly implemented a policy of immediate collection and refund of value-added tax for physical delivery of gold traded through the Shanghai Gold Exchange On January 29, 2008, the Ministry of Finance and the State Administration of Taxation issued the "Notice on Tax Policies Related to Gold Futures Trading" (Cai Shui [2008] No. 5), clarifying that starting from January 1, 2008, when physical delivery occurs in gold futures trading on the Shanghai Futures Exchange, the tax policies applicable to gold trading on the Shanghai Gold Exchange will be implemented. This policy expands the scope of tax incentives and incorporates gold futures trading into a unified tax framework.

History proves that the policy evolution of gold is oriented towards encouraging marketization. Under this main thread, understanding the recent 2025 gold tax policy is quite clear: firstly, it aims to guide gold trading towards on-exchange transactions, enhancing the status and attractiveness of the Shanghai Gold Exchange and the Shanghai Futures Exchange as the main channels for gold trading; secondly, it aims to guide the gold market towards standardization and centralization, and on this basis, improve transparency and regulatory effectiveness.

III. Impact of the New Tax Policy on Market Participants

The implementation of the new policy may affect the investment behavior of three types of gold participants.

Firstly, members and clients of the Shanghai Gold Exchange and the Shanghai Futures Exchange must strictly declare the purpose of their transactions.

To ensure the accuracy of classified management, the State Administration of Taxation requires in its announcement:

① Member units must indicate on the delivery order submitted to the exchange whether the purchased standard gold is for investment purposes or non-investment purposes before the standard gold is physically delivered out of the warehouse.

② Member units should retain documentation to substantiate the actual use of standard gold purchased from the exchange, including sales contracts, goods delivery orders or material input orders, transfer payment records, etc., and establish a ledger for gold purchases and sales.

Secondly, gold investors can reduce their tax burden through the exchange, effectively encouraging off-exchange traders to accelerate their transition to on-exchange trading.

Purchasing standard gold bars for investment purposes through the exchange or its agency products (such as gold ETFs, accumulated gold) incurs lower tax costs, making it more advantageous.

Thirdly, downstream businesses in the gold processing and retail industry may face rising costs of gold, which may be indirectly passed on to the retail end.

For non-investment gold enterprises (such as jewelry and industrial uses), due to the reduction in input tax deductions (from 13% to 6%), the cost of gold may increase.

Although individuals purchasing gold jewelry are still subject to the unchanged tax policy (including 13% value-added tax and 5% consumption tax) since it is considered a consumer product, the new policy may indirectly affect retail prices by influencing raw material costs.

Authors of this article: Zhou Junzhi, Chen Yi, Source: CSC Research Macroeconomic Team, Original Title: "How the New Gold Policy Affects Market Participants | JianTou Macro · Zhou Junzhi Team"

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances Invest based on this, and you bear the responsibility