The social and economic impact of the corona pandemic is devastating worldwide. State rescue packages and bank aid on an unprecedented scale are designed to alleviate the social hardship of the people. An economic stimulus package put together by the German government is intended to increase people’s willingness to buy and to provide financial support to companies during and after the corona crisis. A key component, the heart of the package of measures, so to speak, is the reduction in value-added tax. The decision-makers’ desire to boost the German economy is very ambitious. At first sight, the measure is rather a small relief for each individual consumer. But what exactly is it about?
The VAT reduction, which is limited in time from 1 July to 31 December 2020, concerns both the standard tax rate, which has been reduced from 19 per cent to 16 per cent (goods such as cars, furniture, smartphones, televisions), and the reduced rate, which has been lowered from 7 per cent to 5 per cent (everyday goods, including food). But to what extent are investors in precious metals affected by the temporarily low VAT? Do consumers enjoy financial advantages in their pension provision efforts?
Do gold buyers benefit from the reduction in VAT?
If there is a winner in the Corona crisis at all, it is gold. Gold has become more expensive due to the corona pandemic and is now trading at USD 1,765 per troy ounce (31.103 grams). Since the beginning of the year, gold has risen by around 13 percent. Investors who hope to gain an advantage from the VAT reduction when buying gold will nevertheless be disappointed.
In Germany, gold has been exempt from VAT since 1993, provided it is explicitly investment gold with a purity of at least 995/1000. The exception is collector coins, which are traded at a multiple of their metal value. Moreover, the VAT exemption for gold has also been in force in all EU Member States since 2000.
Which precious metals benefit from the VAT reduction?
The current high price of gold may also scare off some investors. “Those who do not want to pay the high price of gold could opt for silver, platinum, palladium and rhodium. Because these precious metals benefit from the temporary tax cut,” says Kilian West of the precious metal trader valvero from Berlin. Silver, platinum, palladium and rhodium are white metals and are not subject to VAT. Actually the white metals are taxed with 19 percent VAT. For many investors this has been a good reason so far not to buy silver, platinum, palladium and rhodium in ingot form or to buy them only as a small admixture in their portfolio.
The announced cut in the VAT makes buying silver, platinum, palladium and rhodium quite interesting. The price discount of three percentage points could certainly boost a long-term yield. Still, an intelligent weighting is advantageous for a good portfolio.
Born 1981 in Strasbourg, is a freelance journalist for various online media throughout Europe, focusing on finance, real estate and politics. He gathered his professional expertise as a consultant for global players and medium-sized companies. Fournier studied economics and german in Paris and Dresden. He currently lives in Saarland and has been a member of the Euro Leaders team since the beginning of 2019.