Taxes on Gold Investments

By Andrean Rifaldo, the Directorate General of Taxes officer

In October 2023, gold prices broke records, soaring past Rp1.1 million per gram for the first time ever, breaking the highest resistance point in history. Since then, they've surged by at least 20 percent.

Fears stemming from geopolitical tensions in the Middle East have driven global investors to seek refuge in safer, low-risk assets. Gold, with its timeless intrinsic value that consistently outpaces inflation, has become the go-to choice for protection amidst uncertainty.

The ongoing trend of rising gold prices continues to bolster gold's popularity among the public as a promising investment choice.

At Galeri 24 Pegadaian, gold sales have reached 2.3 tons in just the first quarter of 2024. This figure marks a 19.6 percent growth compared to the same period last year.

However, before opting for gold as an investment choice, taxes become a crucial aspect to consider as they will affect the net returns obtained.

As a commodity, gold trading is subject to taxation, with regulations outlined in Minister of Finance Regulation No. 48/2023.

There are differences in tax treatments between gold traded in the form of jewelry and bars. Due to its more strategic nature for long-term investment, gold bars are subject to lighter taxes.

According to Government Regulation (PP) No. 49/2022, gold bars are classified as one of the strategic goods exempted from Value Added Tax (VAT) upon delivery.

However, the gold in question must genuinely be in bar form with a minimum purity of 99.99 percent, and its authenticity and purity must be proven with a certificate. For example, gold bars from Antam, UBS, and Galeri 24 qualify.

This exemption from VAT isn't limited to physical gold purchases; it also extends to digital gold. This measure aims to encourage digital financial innovation by supporting the development of the digital gold market ecosystem.

Meanwhile, VAT will still be levied on the purchase of gold jewelry. However, the rate varies depending on the place of purchase. For consumers buying from jewelry merchants, VAT will be charged at a rate of 1.1 percent of the purchase price.

This rate increases to 1.65 percent if the purchase is made directly from the jewelry manufacturer, or a jewelry merchant who doesn't obtain a tax invoice when acquiring their gold jewelry.

In addition to VAT, Income Tax Article 22 is also applicable in gold trading. The rate is 0.25% of the selling price.

However, this income tax is only collected on gold purchases by gold entrepreneurs. Meanwhile, end consumers need not worry because Income Tax Article 22 will not be imposed on purchases of both physical and digital gold.

When looking at the big picture, the taxes on gold purchases by end consumers are actually quite light.

If purchasing gold bars, there is no VAT or Income Tax Article 22. Meanwhile, if buying gold jewelry, only VAT is applicable, ranging from 1.1 to 1.65 percent of the purchase price.

As an illustration, if someone buys gold worth Rp10 million in the form of gold bars, the buyer only bears the costs provided by the seller without any taxes. Meanwhile, for gold jewelry, the taxes imposed range from Rp110,000 to Rp165,000.

Subsequently, the gold owned must be reported as an asset in the Annual Tax Return. Any capital gains from the increase in the price of gold over time will be recognized as taxable income in the Annual Tax Return when the gold is sold, thus realizing the gains.

The capital gains from such transactions are subject to tax according to the progressive rates outlined in the Income Tax Law, ranging from 5 to 35 percent for individuals and 11 to 22 percent for corporations, based on their taxable income brackets.

Compared to many other countries, the tax treatment of gold in Indonesia is relatively lighter.

For example, in Malaysia, there are discussions that jewelry gold worth more than 10,000 ringgit will be subject to High-Value Goods Tax ranging from 5 to 10 percent. Additionally, the capital gains will also be subject to income tax of up to 30 percent.

Meanwhile, India imposes a 3 percent sales tax on gold purchases. The capital gains are then subject to income tax ranging from 5 to 30 percent, which can be 20.8 percent if the gold is held for more than a year.

Moving on to China, gold sales outside the Shanghai Gold Exchange are subject to a 13 percent VAT, with additional consumption tax on jewelry. This is not including taxes on capital gains.

The tax relief on gold trading is a support for Indonesia’s gold industry, owing to the significant role Indonesia holds in global gold trading.

The United States Geological Survey places Indonesia as the eighth largest gold producer in the world, with production reaching 110 tons throughout 2023. In Central Papua, for instance, the Grasberg Mine continues to be one of the largest gold mines globally, accounting for 1.5 percent of global production.

On the other hand, national gold demand has also reached 45.3 tons in 2023, contributing 1.38 percent to the total global gold demand of 3,282 tons.

With its ability to hedge against inflation and supported by favorable taxation, gold remains a worthwhile investment option, especially amid the ongoing uncertainty in global monetary and geopolitical conditions.

*) This article represents the author's personal views and does not represent the stance of the institution. The Indonesian version of this article has been published in Kompas.com on April 29th, 2024.

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