Revenue Note for Guidance

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Revenue Note for Guidance

90. Investment gold

Summary

This section implements EU Council Directive 98/80/EC (now Articles 344 to 356 of the VAT Directive) dealing with a special scheme for the VAT treatment of investment gold. Provisions in Schedule 1 to the VAT Act also apply.

Essentially, this special scheme:

  • exempts transactions in investment gold from VAT (see paragraph 9 of Schedule 1), thus treating them the same as financial services for VAT purposes, and
  • ensures that Community producers and transformers of investment gold are not discriminated against compared to third country producers and transformers by providing a series of options for the waiver of the exemption so as to avoid the incidence of trapped VAT.

Details

(1) The terms ‘intermediary’ and ‘investment gold’ are defined under the special scheme.

(2) All investment gold, whether in physical form or represented by paper transactions (securities and the like), is covered by the provisions of the special scheme

(3) A person who produces investment gold or transforms gold into investment gold is given the right to waive his or her exemption from tax in respect of a supply of investment gold to a taxable person. This allows the supplier to claim input tax incurred in relation to that supply

(4) Agents are allowed to waive their own exemption rights in respect of their intermediary services when taking part in transactions where the supplier of the gold has availed of the option to tax under subsection (3).

The right to waive exemption recognises the dual use to which investment gold can be put. While investment gold is usually traded for investment purposes, it can also be used for industrial production (e.g. jewellery manufacturing). For this reason, an option to tax specific transactions in investment gold is necessary to provide the mechanism to prevent trapped VAT. For example, if investment gold is sold for industrial purposes, the person making the supply can waive his or her exemption and can claim input credit in respect of that transaction. The purchaser who is going to use this gold as an input in his or her industrial activity will be able to claim the VAT charged on the gold in accordance with the normal deductibility rules.

The detailed conditions under which waiver rights may be exercised are contained in Regulation 33 of the VAT Regulations 2010 and cover such issues as how to verify that the supply is genuinely a business to business transaction.

(5) Subsection (5) covers liability to tax when the option to waive the right to exemption has been exercised.

  • Paragraph (a) establishes a reverse charge, making the purchaser of the investment gold an accountable person and liable to pay the tax on a supply by a person who has waived his/her right to exemption. It also relieves the supplier of his/her liability.
  • Paragraph (b) allows the person who is made liable for tax under paragraph (a) to deduct the tax, if his or her subsequent supply of the investment gold is exempt. The deduction can be taken in the taxable period when the liability arises, so there is no cash-flow disadvantage to the taxpayer.

(6) Subsection (6) establishes the right to deduct tax charged on supplies, intra-Community acquisitions and imports of non-investment gold when the gold is transformed into investment gold and subsequently supplied exempt of tax.

  • Paragraph (a) covers deductions by accountable persons. The deduction is allowed as part of the accountable person’s normal VAT return.
  • Paragraph (b) gives persons a right to claim a refund on the tax charged. Details of the conditions and procedures for this refund are contained in Regulation 34 of the VAT Regulations 2010.

(7) Subsection (7) covers the right to deduct tax charged on services which modify gold that is subsequently supplied exempt of tax.

  • Paragraph (a) provides deductibility for these services when supplied to accountable persons. The deduction is allowed as part of the accountable person’s normal VAT return.
  • Paragraph (b) allows persons to claim the tax on these services by way of refund, in accordance with conditions set down in Regulation 34 of the VAT Regulations 2010.

(8) Subsection (8) establishes the right to deduct tax charged on inputs consisting of associated goods or services that are used to produce investment gold, or transform gold into investment gold, which is subsequently supplied exempt of tax.

  • Paragraph (a) allows an accountable person to deduct tax charged on the supply of associated goods or services in the normal way through the VAT return.
  • Paragraph (b) allows persons to claim the tax by way of refund, in accordance with conditions set down in Regulation 34 of the VAT Regulations 2010.

(9) Subsection (9) provides for the verification of the identity of buyers of investment gold of a value in excess of €15,000. It also provides for the retention of relevant records kept under section 85(3).

Relevant Date: Finance Act 2020