Risks for buyers on buying non pure gold coins

Risks for Canadian buyers on buying non pure gold coins

So you live in Canada, and you really like a certain gold coin that isn't pure gold (24 karat or 999 or 9999 or 99999).

This coin that you are really interested in could be an:

  1. American Gold Eagle (22 Karat)
  2. Gold Sovereigns (22 Karat)
  3. Gold Krugerrand (22 Karat), or
  4. Some very old gold coin

The following is a summary of the law that pertains to these types of coins

In Canada, precious metal bullion is typically free from GST/HST if they are in the form of bars, ingots, coins, or wafers made of gold, silver, or platinum. The purity must be at least 99.50% for gold and platinum and 99.9% for silver. However, products made of palladium do incur GST/HST.

For exact information refer to the Canadian governments website (go to clause 27) - https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/17-1/definition-financial-instrument.html

The following is the text from that page as of September 1, 2023

Precious metals

Definition of precious metal
ss 123(1)

27. A "precious metal" is a bar, ingot, coin or wafer of gold, platinum or silver that is refined to a purity level of at least

  1. 99.5% in the case of gold and platinum, and
  2. 99.9% in the case of silver.

Policy statement
P-192, Supplies of Precious Metals

28. A precious metal in the form of a bar, ingot or wafer at the required purity levels must generally be recognized and accepted for trading on Canadian financial markets. Ordinarily, these will bear markings indicating their purity level. They will also have an identification mark of the issuing financial institution or refinery. With respect to coins, only those metals at the required purity levels that have been issued by a government authority and that may be used as currency will qualify.

29. Any supply of a precious metal (i.e., gold, platinum or silver) meeting the purity requirements, as set out in the definition of precious metal in subsection 123(1), is a supply of a financial service and generally exempt. Metals of this quality are normally investment-related and are usually bought and sold on international exchanges that establish world-wide precious metal prices.

30. The sale or purchase of a precious metal, in the course of a commercial activity, that does not comply with the defined requirements is not considered a supply of a financial instrument, but rather a supply of property. Generally, the sale of gold, platinum or silver in bar, ingot, coin or wafer form with a purity level of less than 99.5% for gold and platinum, and less than 99.9% for silver is taxable at 7% or 15%. The sale of gold, platinum or silver at the defined purity levels, but not in the form of a bar, ingot, coin or wafer (e.g., in granular form), is taxable at 7% or 15%.

How will buying one of these non pure gold coins in Canada really impact me?

The answer is "it depends".

American Gold Eagles sell for well above spot in the United States, and are always in very high demand. So if you plan on travelling stateside, then these may be the right fit for you.

Vintage and ancient gold coins like sovereigns go up in value at a higher rate than just spot. So if you have a keen eye for these types of coins, and understand their growth potential, then the GST/HST issue should be a lesser problem for you.

But if you are buying bullion in Canada, and you don't want to pay tax then we recommend that you select only pure gold coins like the Gold Maple Leaf, the US Buffalo, the Australian Kangaroo or the British Britannia gold coins. Anything that is 999 or better is tax free.




Copyright © 2024 401Gold Inc | All Rights Reserved