Canada’s rules regarding Goods and Services Tax (GST) and Harmonized Sales Tax (HST) are confusing for many businesses, partially because there are many gray areas when tax may or may not need to be imposed. One such area of legal contention is regarding precious metals and GST/HST. GST or HST may apply in some circumstances but not in others. Not collecting and remitting GST or HST when it is due can expose a business to tax liability with tax authorities. If you deal with precious metals in Canada, you may choose to seek counsel from an experienced GST/HST lawyer who can advise you about whether or not you are subject to GST or HST. You can contact an experienced tax lawyer at Jeremy Scott Law for a confidential consultation by calling (902) 403-7201.
Importance of Determining Tax Treatment of Precious Metals
Precious metals have a very specific definition under Canadian law. If the metal is in certain forms and at a certain purity level, no GST or HST tax is due. However, if the metal does not meet these specifications, GST or HST may apply and a business would be responsible for registering for GST/HST and remitting payment to the Canada Revenue Agency. Failing to collect tax that is due to the government can subject a business to tax liability that can threaten its finances and reputation.
Financial Instrument Definition
Precious metal is included in the definition of financial instruments in Canada, which is described in the GST/HST Memorandum 17.1 as any of the following:
- A debt or equity security
- An insurance policy
- An interest in a partnership, trust, estate of a deceased individual, or any right in any of the preceding
- A precious metal
- An option or contract for the future supply of a commodity when it is traded on a recognized commodity exchange
- A prescribed instrument
- A guarantee, acceptance or indemnity for any of the above
- An option or contract for the future supply of money or any of the above
Precious Metal Definition
Canada law further defines precious metal as any of the following forms of gold, platinum, or silver:
- Bar
- Ingot
- Coin
- Wafer
The metal must be refined to a purity level of at least 99.5% for gold and platinum or 99.9% for silver to meet the definition. When precious metal meeting the definition above is sold, GST or HST does not apply.
Precious Metals and GST/HST FAQs
At Jeremy Scott Law, we receive many questions about precious metals and GST/HST. Here are frequently asked questions about precious metals and GST/HST.
Is There Sales Tax on Precious Metals in Canada?
Generally, there is no GST or HST on precious metals in Canada as long as the metal has a minimum purity of 99.5% for gold or platinum or 99.9% for silver. This applies whether the precious metal is in any of the following forms:
- Coin
- Bar
- Ingot
- Wafer
Are Precious Metal Sales Taxable?
Generally, if you sell precious metals, the transaction does not incur GST or HST. However, a common scenario the Canada Revenue Agency confronts is when sellers try to circumvent GST or HST, usually stemming from the sale of scrap gold. For example, the CRA may find that GST or HST should apply in the following scenario:
- A customer sells scrap metal that does not have the requisite purity level to a gold shop
- The gold shop sends the scrap to a refiner
- The refiner charges a fee to smelt the scrap metal
- The refiner sends gold that has the requisite purity level to the gold shop
The CRA may take the position that the refiner should be charging the gold shop for GST or HST.
Is Gold and Silver Taxable in Canada?
Transactions involving the sale of gold or silver bullion, coins, ingots, or wafer are not generally subject to GST or HST, provided they are at the requisite purity level.
Can You Own Gold Bars in Canada?
Owning gold bars is one of the most practical ways to invest in gold. There is nothing illegal about owning gold bars in Canada.
Do Banks in Canada Buy Gold Bars?
Yes, banks in Canada often buy gold bars. They are the main retailers of bullion in Canada. You can gain access to gold, silver, and platinum through banks in Canada. You can also purchase gold bars and coins directly from the Royal Canadian Mint at its online store.
Is There GST on Silver Bullion?
There is not generally GST on silver bullion in Canada. Gold and silver bullion falls under the definition of precious metal in Canada, which is not generally taxable for GST or HST purposes as long as it meets the minimum purity levels.
Is There Tax on Selling Silver in Canada?
No. There is not generally tax on selling silver in Canada as long as it has a purity level of 99.9% and is a bar, ingot, coin, or wafer. If the purity level is below this amount, the tax rate is 7% or 15%, depending on the province.
Is There GST on Silver Palladium?
Unlike gold, silver, or platinum bars, ingots, coins, or wafers, palladium products are subject to HST or GST in Canada.
Are Gold Bars Traceable?
Yes, gold bars are usually traceable. If they are 250g or greater, they should have a serial number on them. This number helps an assay office authenticate gold bullion. The serial number should be listed on any invoice you receive from a seller and can trace it back to the dealer.
Contact an Experienced Tax Lawyer for Advice and Guidance
If you deal in precious metals and GST/HST is a confusing topic for you, you are not alone. The tax lawyers at Jeremy Scott Law are well-versed in tax law and the requirements surrounding GST and HST. We can help you determine your tax liability, register your business for HST/GST, if necessary, and create a plan to help ensure you comply with Canada’s complex tax laws in the future. Consider contacting our experienced legal team for a confidential consultation by calling (902) 403-7201.
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The Disclaimer:
Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face. I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.