Is the balance backed with gold

Xetra Gold remains tax-free

In July 2020, Federal Finance Minister Olaf Scholz dropped the bomb: Gold certificates such as Xetra Gold should in future be subject to the withholding tax. This announcement was a severe blow to gold investors. Until now, gold certificates have always been tax-free and the profits generated by gold have therefore been more profitable than stock profits and dividends. At the beginning of September 2020, investors were able to breathe a sigh of relief again. Scholz's plans have been put on hold and Xetra Gold will remain tax-free as before.

That is why the legislature wanted to tax Xetra Gold

The corona crisis initially had little impact on the gold price. It let the price fall rather than rise. But at the beginning of August the gold price suddenly rose sharply and even cracked the $ 2,000 mark. In the meantime, the dollar price of the precious metal rose by almost 30 percent from the beginning of the year. German investors, with whom the precious metal is extremely popular, also had an influence on this - especially in times when they are worried about negative interest rates and the financial and economic system.

However, the majority of investors did not rely on physical, tax-free investment gold, but instead Xetra Gold. The reasons for this are various surcharges that have to be included in the price when purchasing physical gold, as well as the costs for storage.

Xetra Gold is a bondthat certifies the investor's right to delivery gold. A bond corresponds to the value of one gram of gold in euros and is backed by this amount of physical gold. This reduces the risk of default and investors can have the physical gold delivered if necessary. At the end of June 2020, the gold inventory of Xetra Gold was more than 220 tons.

In addition, Xetra can buy and sell gold online with just a few clicks. In contrast to physical investment gold, the spread between the buying and selling price is very small and the problem with gold storage is completely eliminated. So far, the profits have also been tax-free, provided that Xetra Gold was held for at least twelve months. This is exactly what Olaf Scholz wanted to change in his role as Federal Minister of Finance. After all, it seems as if Xetra Gold guarantees high tax revenues - especially in view of the high gold inventory with which Xetra Gold is currently backed.

The background to taxation

Of course, no new tax should be invented to tax profits from Xetra Gold. In future, Xetra Gold should be subject to the withholding tax that investors already pay on dividends and share profits. This plan was laid down in the ministerial draft of the Annual Tax Act 2020, which should apply from 2021.

According to the draft at the time, investors would have to tax realized profits with Xetra Gold at a total of 26.375 percent (25 percent plus 5.5 percent solidarity surcharge). In some cases, the church tax would then be added, so that the total tax rate would be around 27 percent.

With the introduction of the final withholding tax for Xetra Gold, the holding period of twelve months would also have become obsolete - in principle, taxation would always have taken place. Thus, Xetra Gold would have been treated in the same way as many other certificates for which there is no right to delivery. The consequence of the taxation of gold certificates would inevitably have made Xetra Gold less attractive for investors.

The consequences of taxing Xetra Gold

Although the final withholding tax for gold certificates only appeared in the draft bill for the time being, some investors have already considered how they should behave should the taxation actually come into force.

Some investors who had held Xetra Gold for more than twelve months sold their bonds early. Others held them for the time being in order to react quickly in an emergency. Investors who had not owned Xetra Gold for twelve months and were therefore unable to escape the taxation that is already in force were recommended to have the bonds delivered in physical gold according to their value. Because physical investment gold remains tax-free - if it is held for more than twelve months - investors could have avoided future tax liability. After all, the extradition is not considered a taxable sale, as the Federal Fiscal Court has already ruled. However, delivery also incurs costs - for example for embossing, transport, storage and insurance - for the investors.

Xetra Gold remains tax-free - why?

The government draft of the Annual Tax Act was published on September 2, 2020. To everyone's surprise, the passage that declared “Income from other capital claims” and thus also Xetra Gold was suddenly missing in this draft. One reason for this, albeit serious, change was the loud criticism that had been raised against the planned taxation of Xetra Gold. Many lawyers saw an incompatibility of the change with the case law of the Federal Fiscal Court (BFH). This had already decided in several judgments regarding such certificates that they would not constitute any capital claims (VIII R 4/15, 35/14 and IX R 33/17). Some even went so far as to claim that the legislature would use the ministerial draft to try to change or expand the definition of a capital claim.

Xetra Gold and other gold certificates as well as Euwax Gold II remain tax-free according to the current status. It is conceivable that the legislature could come up with the idea of ​​taxing gold certificates again in the future. For this year as well as for the next few years, the withholding tax for Xetra Gold and Co seems to be off the table. Real crisis insurance away from the financial market - and this should be clear to you as an investor - is and will ultimately only be physical gold.