How Much Gold Can You Sell Without Reporting in Canada?
Selling your gold in Canada is ordinarily a harmless activity, a part of the many commercial and transactional activities that, contribute to the economy of this country. But inasmuch as it is a harmless activity, there are certain regulations that still guide these activities. One of the more important set of laws guiding these transactions are the ones that have to do with taxes and income reporting, and thus whether or not you need to report the sale of gold.
You might already know this, but you do not need to always report the sale of gold or every other transaction you participate in to get some income. Most times whether or not you have to report a transaction (as an ordinary citizen who is not in that business- depends) on the volume of the transaction.
So, Just how much gold can you sell without reporting in Canada? When you sell gold worth more than $200, it is required by law that you report it. However, when the transaction is worth less than that you do not have to report the sale of gold.
This article takes a look at everything surrounding gold-related transactions in Canada as well as what you might have to report, exceptions, and related taxes.
What Amount of Gold Can You Sell Without Reporting in Canada?
The importance of reporting certain transactions that contribute to one’s income stems from the civil obligation to pay taxes. In Canada this is (to a large extent) controlled by the Income Tax Act and the Income Tax Regulation.
The law that determines whether you report the sale of gold requires traders or dealers of securities to report transactions with all individuals, corporations, partnerships, trusts, or any other person residing either in or outside Canada. The Canada Revenue Agency also specifies that some transactions have to be reported even if you do not have to pay any tax on those transactions.
Ordinarily you might not define gold as “securities” and so you might not consider any transaction involving gold worth reporting. Under the law, securities are also defined as “publicly traded options or contracts for financial futures, foreign currency, or precious metal” and “publicly traded options or contracts for any property including any commodity.” The CRA considers gold a commodity.
The question which might then arise is what are precious metals according to Canadian law? They are defined as coins, metals (especially gold and silver) before coining, or certificates that represent those metals. It also specifies that precious metals here do not include jewelry, art works, or numismatic coins (coins that are valuable to collectors).
This definition of “precious metals” may make it seem like you do not need to report the sale of gold, particularly if it is the type of gold you may be looking to sell at our store. But here are some other things to consider before you finally decide that your gold sale should not be reported.
To report securities transactions you’ll need to fill a T5008 form. The Canada Revenue Agency has also explicitly stated that “a sale of currencies or precious metals in the form of jewelery, works of art, or numismatic coins” and “a sale of precious metals if you ordinarily produce or sell precious metals in bulk or commercial quantities” does not have to be reported in a T5008 information return.
What does all of this mean? As a general rule, when the total value is worth less than $200 you do not have to report the sale of gold. However, once it is above $200 you need to consider the type of gold you are selling to determine if it is to be reported or not.
Where you are not too sure if you need to report the sale of gold you should speak to a tax expert and follow their advice. If you cannot afford to speak to a tax expert it is best to file just to remain on the safe side and avoid any unnecessary fines.
Taxes on Gold in Canada
Considering the types of tax which may apply to gold in Canada, the ones that readily come to mind are the GST/HST and Capital Gains Tax. Since holding gold itself (physical or otherwise) is not taxable, what is taxed most of the time relates to the sale of the gold.
The capital gains tax on gold is the tax you pay on the profit you make after selling. The total amount you receive is not what is taxed, only your gain on the asset. To calculate your gain all you have to do is subtract the amount you paid to acquire the gold from the amount you got while selling it.
As a general principle, if you recorded a loss on a transaction involving gold you would not have to pay any capital gains tax on it.
On the other hand, The GST/HST translates to mean a goods and services tax that is attached to most goods and services that are provided in Canada. In some provinces the GST has been blended with the provincial sales tax to form the Harmonized Sales Tax (HST).
When it comes to gold, a precious metal which is also one of the definitions of a “financial instrument” according to ss 123(1) of the Canadian Excise Tax Act, the rules are quite different. Under the act the supply of financial services (transactions relating to financial instruments or money) is exempt from GST/HST unless specifically listed as zero-rated.
However, it is important to keep in mind that only precious metal is considered a financial instrument and therefore exempt from GST/HST. The same ss 123(1) of the Excise Tax Act defines a precious metal as a bar, ingot, coin or wafer of gold, platinum or silver that has been refined to a certain purity level.
In the case of gold and platinum, to qualify as precious metal it must be at least 99.5% pure. In the case of silver it has to be at least 99.9% pure.
The reason these are exempt from GST/HST is that gold in the above-mentioned form with those purity levels are typically issued by financial institutions, refineries, or government authorities. Gold of the said quality is also, more often than not, investment related.
Any other precious metal that is not in the form of bars, ingots, coins or wafers will not be considered a financial instrument but rather a supply of property. Therefore, the sale will be taxable at 7% or 15%. This also applies to any precious metal that is in the above stated form but does not meet the required purity levels.
The supply of carat gold in jewelry or chattel form, as long as it does not meet the requirements of form and purity, will also be taxed at the usual 7% or 15%.
For capital gains tax on the sale of gold it is important to realize that only half of your capital gains will be taxed at your marginal tax rate. This means that only 50% of the profit on the sale of an investment will be added to your taxable personal income.
The rate at which that amount will then be taxed depends on your other income and your resulting tax rate.
The laws surrounding reporting the sale of gold and actual taxes can be quite complex. Apart from just being complex, these laws also tend to change very frequently. Therefore, it is advisable that you do your own research or talk to a tax expert since the information here does not qualify as legal or financial advice.
How Much Gold can a Person Own in Canada?
There is no limit on the amount of gold you can own as a private individual in Canada. Like most other commodities, ownership of gold is not regulated by the government.
Do You Pay Tax for Owning Gold in Canada?
No. What is taxed when it comes to gold arises from a transaction i.e. when you buy or sell the gold. You will not have to pay taxes for merely owning and/or storing gold.
How Can I Sell Gold Without Paying Taxes in Canada?
It is not advisable that you try to evade paying taxes you ought to pay from selling gold. However, you can always talk to a tax expert who might be able to take a better look at your income and advise you better.