Investment in precious metals

Taxes on precious metals in Germany

Gold has a special tax regime—it is more advantageous than that for shares and funds, but it only works under certain conditions. Let's break it down step by step.

Physical gold: a year decides everything

Buying a bar or coin is a private property transaction (§ 23 EStG), not a capital transaction. From this, two consequences follow.

A pitfall that hardly anyone warns you about. Within the one-year period, it is not the tax-free allowance that applies, but rather thresholdprofits remain tax-free only if the total income from all private transactions for the calendar year amounted to less than €1,000. Exactly 1,000 euros — and it is subject to tax all the total amount, not the excess. This is a fundamental difference from the tax-free threshold on deposits.

Practical conclusion: if a sale within the year yields a profit of about a thousand euros, the difference between 999 and 1,000 euros costs you the full tax on the entire amount. Sometimes it is wiser to sell part in December and part in January — or simply wait for the year to expire.

Keep purchase documents. You will have to prove the acquisition date and price, not the tax office. Without a receipt, the one-year period cannot be confirmed.

VAT: why is gold cheaper than silver?

Investment gold is exempt from VAT under § 25c UStG. However, not just any gold—the law sets precise criteria:

• Ingots and plates — purity no lower than 995 thousandths and the weight accepted in the gold markets
• Coins — purity no lower than 900 thousandths, minted after 1800, are or were legal tender in the country of origin, are sold at a price close to their metal value

Practical meaning: Krugerrands, Maple Leafs, Vienna Philharmonics and standard bullion bars qualify for the exemption. But silver, platinum and palladium — no: There is either a flat rate of 19 per cent or a differentiated tax rate when purchasing from a dealer. This immediately creates a yield gap that works against silver.

Jewellery and commemorative coins sold at a price significantly above the value of the metal are not considered investment gold.

Exchange-traded gold products: a difference of a single line in the prospectus

Hence the rule when choosing an exchange product: check the prospectus to see if there is the right to demand physical delivery and whether the issue is fully backed by metal. It is this exact line that determines whether the profit will be taxable or not. Wording like «tracks the price of gold» guarantees nothing.

Cash purchases: identification threshold

When purchasing precious metals with cash from €2,000 the dealer is legally required to establish and record your identity — Section 10 GwG. This is not a ban or a tax: from this amount onwards, the transaction simply ceases to be anonymous.

There is no point in splitting a purchase into several payments below the threshold: related transactions are aggregated, and the dealer is obliged to keep track of this.

Costs: three factors that eat into returns

More details about value limits can be found on the page home insurance.

What proportion of one’s portfolio does it make sense to hold in gold?

The key characteristic of gold as an asset: it does not generate any income. There is no interest, no dividends and no corporate profit. The only source of return is a change in price. Therefore, gold is not a substitute for shares and bonds, but serves a different purpose.

• What it does well: behaves differently from the stock market and therefore reduces the volatility of the portfolio as a whole. It is not linked to the solvency of any particular issuer.
• What it does badly: Over the long term, it underperforms the broader equity market in terms of returns. It may remain flat or fall in price for years on end.
• What it is not: nor a source of regular income and not a guarantee against any losses. The price of gold fluctuates, sometimes significantly.

A sensible approach is to set an allocation in advance, as a percentage of your portfolio, and stick to it, buying more when the allocation falls and selling some when it rises. The decision to «buy because the price is rising» is the most common way of paying over the odds.

What else to read

• ETFs in Germany and ETF savings plan — the core of the portfolio
• Investor taxes in Germany — how are shares and investment funds taxed?
• EasyInvesto, ComfortInvest, Whitebox — portfolio under management
• Home contents insurance — limits on valuables and cash
• Taxation of cryptocurrencies — that same § 23 EStG applies there

Sources

• Section 23 of the Income Tax Act (EStG) — private transactions, the one-year time limit and the €1,000 threshold: gesetze-im-internet.de
• § 25c of the German Value Added Tax Act (UStG) — exemption of investment gold from VAT: gesetze-im-internet.de
• § 10 GwG — identification for cash transactions: gesetze-im-internet.de
• Section 20 EStG — investment income: gesetze-im-internet.de
• Federal Ministry of Finance — guidance on taxation: bundesfinanzministerium.de
• Federal Financial Supervisory Authority bafin.de