Know what the Tax Implications of Buying Gold in Canada are?

Important note from 401Gold Inc. It's always advisable to consult with a tax professional or accountant who is knowledgeable about Canadian tax laws to understand the specific tax implications of buying gold based on your individual circumstances. They can provide personalized advice based on your situation.

In Canada, the tax implications of buying gold in Canada and other precious metals such as silver or platinum will depend on the specific circumstances of the investment and the applicable tax laws. Here are a few points to consider:

1. Capital gains tax: If you sell gold coins for a profit, the profit may be subject to capital gains tax. In Canada, capital gains tax is levied on the profit from the sale of a capital asset, such as a gold coin. The tax rate for capital gains is generally lower than the tax rate for other types of income.
2. GST/HST: Gold coins that are not considered to be legal tender may be subject to the goods and services tax (GST) or the harmonized sales tax (HST). The GST/HST rate will depend on the specific province or territory where the coins are purchased or sold.
3. Inheritance tax: If you receive gold coins as a gift or as part of an inheritance, the coins may be subject to inheritance tax. Inheritance tax is a tax on the transfer of property at the time of death, and the tax rate will depend on the specific province or territory where the deceased person lived.
4. Precious metals bullion in Canada, such as coins, bars, ingots and wafers of gold or silver with a minimum purity of 99.50% for Gold and Platinum and 99.9% for silver are exempt from GST/HST. Examples of gold products that incur HST when sold by a dealer are any coin under 24k such as American Gold Eagles which have a fineness of 91.67% (22k). For a more detailed guide on this topic, please visit https://www.401gold.ca/risks-for-buyers-on-non-pure-gold-coins/

It's important to note that tax laws can change over time and may vary depending on the specific circumstances of the investment. It's a good idea to consult with a tax professional or financial advisor for advice on the tax implications of buying gold in Canada

Example of gold products that incur HST & GST on sale include:

• All jewellery
• Gold coins with a purity of less than 99.5%, like American Gold Eagles (see our US Gold coins) or Gold Sovereigns

Capital Gains Tax Implications of Buying Gold in Canada

In Canada, the capital gains tax implications of buying gold in Canada may apply when you sell bullion, which includes gold bullion, silver bullion, and other precious metal bullion. The Canada Revenue Agency (CRA) treats bullion as a capital asset, and any profit made from its sale is generally subject to capital gains tax.

When you sell bullion, the capital gain is calculated as the difference between the sale price and the original purchase price. However, only 50% of the capital gain is included in your taxable income. This means that you are taxed on only half of the profit.

The actual tax rate applied to the capital gain depends on your personal income tax bracket. Capital gains are typically taxed at your marginal tax rate, which varies based on your income level. It's important to consult with a tax professional or accountant to determine the exact tax rate applicable to your situation.

It's worth noting that if you incur a capital loss from selling bullion, you may be able to use it to offset other capital gains, reducing your overall tax liability.

As always, the tax implications of buying gold in Canada and their regulations can change, so it's essential to stay updated with the latest information from the CRA or consult a tax professional for accurate and current advice regarding capital gains tax on bullion in Canada.

For information on this matter, please refer to https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/17-1/definition-financial-instrument.html

The following is a description of what the CRA states as of July 29, 2023

Precious Metals: Understanding the Definition and Taxation in Canada

In the world of finance and investments, precious metals have held a timeless allure as valuable assets. In Canada, these metals, namely gold, platinum, and silver, are defined and regulated under specific guidelines to ensure transparency and reliability in the market. Let's delve into the definition of precious metals and their taxation status in the Canadian financial landscape.

Definition of Precious Metals

According to subsection 123(1) of the Canadian policy, a "precious metal" refers to a bar, ingot, coin, or wafer made of gold, platinum, or silver. To be classified as a precious metal, these items must undergo a refining process to achieve specific purity levels, which are as follows:

1. Gold and Platinum: Purity level of at least 99.5%
2. Silver: Purity level of at least 99.9%

Policy Statement: P-192, Supplies of Precious Metals

Under policy statement P-192, the supplies of precious metals in the form of bars, ingots, or wafers at the required purity levels are generally recognized and accepted for trading on Canadian financial markets. These precious metal items typically bear markings that indicate their purity levels and carry an identification mark of the issuing financial institution or refinery.

Coins made of precious metals also qualify, but they must meet the required purity levels and be issued by a government authority for use as currency to be considered eligible for trading.

Taxation and Exemption of Precious Metals

Any supply of a precious metal (gold, platinum, or silver) that meets the defined purity requirements is considered a supply of a financial service and is generally exempt from taxation. Such metals are commonly associated with investment-related activities and are traded on international exchanges that establish global precious metal prices.

However, the sale or purchase of a precious metal that does not comply with the defined purity requirements is not considered a supply of a financial instrument but rather a supply of property. In such cases, taxation applies based on the purity levels and the form of the metal:

1. 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 either 7% or 15%.
2. 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 either 7% or 15%.

It is important for individuals and businesses involved in the trading of precious metals to be aware of these taxation rules to comply with the Canadian tax regulations.

Understanding the definition and taxation of precious metals in Canada is crucial for investors and market participants alike. By adhering to the defined purity levels and taxation guidelines, the precious metal market remains transparent, reliable, and conducive to thriving investment opportunities.