This is the case not only for gold coins and ingots, but also for most ETFs (exchange-traded funds), which are subject to taxes of 28%. Many investors, including financial advisors, have trouble owning these investments. They assume, incorrectly, that since gold ETFs are traded as stocks, they will also be taxed as stocks, which are subject to a long-term capital gains rate of 15 or 20%. Investors often perceive the high costs of owning gold as profit margins and storage fees for physical gold, or management fees and trading costs of gold funds.
In reality, taxes can represent a significant cost of owning gold and other precious metals. Fortunately, there is a relatively easy way to minimize the tax implications of owning gold and other precious metals. For individual investors, Sprott Physical Bullion Trusts may offer more favorable tax treatment than comparable ETFs. Because trusts are based in Canada and are classified as passive foreign investment companies (PFIC), U.S.
non-corporate investors are entitled to standard long-term capital gains rates for the sale or reimbursement of their units. Again, these rates are 15% or 20%, depending on revenue, for units held for more than one year at the time of sale. While no investor likes to fill out additional tax forms, the tax savings of holding gold through one of the Sprott Physical Bullion Trusts and participating in the annual elections can be worthwhile. To learn more about Sprott Physical Bullion Trusts, ask your financial advisor or Sprott representative for more information.
Royal Bank Plaza, South Tower 200 Bay Street Suite 2600 Toronto, Ontario M5J 2J1 Canada. Long-term earnings on ingots are taxed at the ordinary income tax rate, up to a maximum rate of 28%. Short-term earnings on ingots, like other investments, are taxed as ordinary income. An asset must be held for more than one year for gains or losses to be long-term.
You must account for the GST and issue a tax invoice based on open market value (OMV) on the 90th. As an investor, you should keep in mind that capital gains are taxed at a different rate, much lower, than labor income. This is called capital gains tax. And since gold is an investment asset, when you sell your gold and make a profit, it's taxed as capital gains.
However, depending on how you've held your gold, you'll have to pay taxes at the ordinary capital gains rate or at an overall rate of 28%. Gold is often taxed differently than other investments, and tax rules vary depending on which of the many different ways to invest in gold you choose.