Definition and legal classification of precious metals
Precious metals are chemical elements characterized by their low reactivity, high density, corrosion resistance, and distinctive physical and chemical properties. The most important precious metals include gold, silver, platinum, and palladium. The term “precious metal” is used in many national and international legal provisions, although the legal definition and classification vary depending on the legislation and context. Precious metals play a significant role in tax law, commercial law, customs law, environmental law, and various special legislative regulations.
Legal definitions and distinctions
European and national regulations
In European Union law and national legal systems, the term “precious metal” is not always uniformly defined. For example, the VAT Directive (Directive 2006/112/EC) distinguishes between investment gold such as gold bars, coins, and other forms. In the German Value Added Tax Act (§ 25c UStG), precious metal is defined in connection with differential taxation and in securities law as part of certain financial products. The customs tariff numbers in the TARIC database and the Harmonised System (HS) determine which goods are to be classified as precious metals.
Distinction from other substances
Legally relevant is in particular the distinction of precious metals from alloys, base metals, and products that only contain traces of precious metals. Often, a minimum degree of purity is prescribed by law in order to be recognized as a precious metal, for example in the tax treatment of gold bars (at least 995/1000 fineness).
Precious metals in tax law
Value added tax law
In German and European VAT law, investment gold is distinguished from other precious metals. The supply of investment gold is exempt from VAT under § 4 no. 8 letter k UStG if the statutory purity requirements are met. Silver, platinum, and palladium are generally subject to VAT, and trade in certain precious metals is subject to differential taxation under § 25a UStG. Special provisions apply to coins, particularly when they are legal tender with collector’s value.
Income and personal income tax law
Precious metals are treated as capital investment objects for income tax purposes. Profits from private trading in precious metals are subject to speculative taxation under § 23 EStG, provided the holding period does not exceed one year. Institutional investors and traders are subject to different tax treatment rules.
Customs and foreign trade law
Precious metals are relevant goods for customs purposes; their cross-border trade is subject to special reporting and notification requirements under the Foreign Trade and Payments Regulation (AWV). For example, cash and valuables exceeding 10,000 euros must be declared upon entry or exit. Trade in raw materials and semi-finished goods containing precious metals may be subject to import and export restrictions.
Commercial and securities law aspects
Trade with goods and financial instruments
Raw and processed precious metals are traded in accordance with the provisions of the German Civil Code (BGB), the Commercial Code (HGB), and the general terms and conditions of precious metal dealers. As tradable objects, they are often subject to special security requirements, for example within the framework of fiduciary custody, consignment, or deposit transactions.
Under the German Securities Trading Act (WpHG) and EU financial market regulation (MiFID II), investment in precious metals is partly regulated in terms of derivatives or as components of exchange traded commodities (ETC) and other financial products. Supervisory and transparency obligations apply here, which must be observed by investors and trading platforms.
Ownership, possession, and security
The transfer of ownership in precious metal transactions follows the rules of purchase law; ownership of gold or silver bars generally passes to the buyer upon handover, unless storage in a collective or individual depot is agreed. There are special regulations for the safekeeping and insurance of precious metals, particularly in banking and deposit law.
Consumer protection and disclosure obligations
Obligations of information and clarification
Vendors of precious metals in distance selling and online trade are subject to comprehensive disclosure obligations under the BGB, the Distance Selling Act, and the Price Indication Regulation (PAngV). They must disclose precious metal details, fineness, hallmarks, and, where applicable, certificates of authenticity. Misleading statements regarding origin, purity, or value may give rise to claims under competition law.
Fraud and anti-money laundering prevention
Due to their value, precious metals are targets for fraud and money laundering. Dealers are subject to extensive identity verification and documentation obligations under the German Money Laundering Act (GwG). Suspicious transactions that are subject to reporting must be notified to the appropriate authorities. Thresholds and reporting obligations may apply depending on the circumstances.
Environmental, waste, and recycling law
Environmental protection and resource conservation
Due to their complex extraction and economic value, precious metals are subject to environmental regulations. The extraction and processing are subject to mining and environmental permits, particularly for the protection against environmental pollution and compliance with emission limits.
Waste law aspects
Old gold, old silver, and industrial waste containing precious metal are subject to waste law. Precious metal-containing waste must be handled in accordance with the provisions of the Circular Economy Act (KrWG) and the Waste Catalogue Ordinance (AVV). The recycling of precious metals is eligible for support and is subject to proof, documentation, and due diligence obligations.
International and comparative law
The classification, regulation, and taxation of precious metals varies significantly internationally. Depending on the country, there are different requirements for purity, seals of quality, taxes, import and export restrictions, and reporting obligations. International organizations such as the Financial Action Task Force (FATF) and the World Customs Organization (WCO) provide industry-specific standards and recommendations for the precious metals trade.
Conclusion
Precious metals are subject to a wide range of legal regulations covering areas from tax law to commercial and environmental law. The correct classification, documentation, and handling of precious metals is of crucial importance to avoid legal and economic risks and ensure compliance with statutory requirements. An in-depth understanding of the relevant provisions is indispensable for the safe and lawful handling of precious metals.
Frequently Asked Questions
Which legal regulations apply to trading in precious metals in Germany?
Various legal provisions must be observed when trading in precious metals in Germany. First, precious metals such as gold, silver, platinum, and palladium as raw materials are subject to general commercial law under the German Civil Code (BGB) and the Commercial Code (HGB). In commercial trade, specific trade law regulations under the Trade Regulation Act (GewO) also apply, including possible notification or licensing requirements for the business. Tax regulations are also relevant; in particular, trading in precious metals is subject to VAT, although the sale of investment gold can be exempt from tax under § 25c UStG. Furthermore, anti-money laundering measures apply to trades exceeding certain thresholds (§ 4 GwG: due diligence obligations for transactions from 2,000 euros in cash), requiring identification and reporting under the Money Laundering Act (GwG). International transactions with precious metals may also be subject to customs and foreign trade regulations. Finally, there is a notification requirement for anonymous transactions under the Customs Administration Act if precious metals are transported across borders.
When must the identity of the business partner be verified when buying or selling precious metals?
The identity of the business partner must be verified when buying or selling precious metals, in accordance with the Money Laundering Act (GwG), if the transaction amount is 2,000 euros or more and the payment is made in cash. This applies to both one-off and related transactions in terms of subject and time. The dealer is obliged to verify and document the identity of the contracting party by means of a valid identification document (identity card, passport, etc.). In addition, the principle of the beneficial owner must be observed in order to trace the origin of the funds if necessary. The documentation requirements also include the preservation and archiving of the collected data for a period of at least five years. If the threshold of 2,000 euros is not reached, identification obligations under GwG do not mandatorily apply, but they may be voluntarily expanded through internal risk management systems.
What are the specific tax features when acquiring or selling precious metals?
Precious metals are treated differently for tax purposes, depending on their type and the purpose of their acquisition or sale. Investment gold is exempt from VAT under § 25c UStG, while silver, platinum, and palladium are generally subject to VAT. The small business regulation applies to sales to private individuals only under certain conditions. When selling from private assets under § 23 EStG, private sales transactions arise, and profits after the one-year speculation period are tax-free. Within the annual period, profits must be taxed as other income, whereby the relevant holding period and profit for each individual sale must be examined. Precious metal dealers are also obliged to correctly account for VAT and, if applicable, the differential taxation according to § 25a UStG. For businesses, profits from trading stocks are always taxable as business income.
Are there reporting obligations when acquiring or selling precious metals?
Yes, there are reporting obligations under certain circumstances when acquiring and especially when internationally transporting or selling precious metals. If precious metals in physical form (such as bars or coins) with a value of 10,000 euros or more are brought into or out of the European Union, this must be reported to the relevant customs office under Regulation (EU) No. 2018/1672 and § 12a ZollVG. There are no direct reporting obligations for transactions within Germany, but the previously mentioned anti-money laundering and tax-related documentation and notification requirements still apply. Banks or other financial institutions processing precious metal transactions are also required to report suspicious transactions under the Financial Supervision Act.
Is the storage of precious metals subject to special legal requirements?
The storage of precious metals is generally not subject to any specific legal obligation to store precious metals in a particular form or place. However, there are legal provisions and recommendations especially for third parties, such as precious metal custodians or banks, that hold precious metals in trust for others. They are obligated to store precious metals separately from their own assets in order to ensure allocation to the owner according to §§ 230 ff. BGB (separate assets). In addition, security standards as well as inventory and verification audits under commercial law must be complied with. There are no statutory requirements for private individuals, but it is recommended to secure storage through suitable insurance and secure custody (e.g. safe deposit box at credit institutions).
How is trading in precious metals regulated in relation to consumer protection?
Consumer protection in the trading of precious metals derives from the general rules for distance contracts under §§ 312c ff. BGB. Dealers who sell precious metals online or outside their business premises to private individuals must provide clear information on the product, price, delivery terms, and rights of withdrawal. However, there is an exclusion from the right of withdrawal when buying precious metals if the price is subject to fluctuations in the financial markets which the provider cannot influence (§ 312g para. 2 no. 8 BGB). This means that the statutory right of withdrawal is generally excluded in precious metals trading. Dealers are required to explicitly point this out.
What legal risks exist when investing in precious metals with regard to counterfeits and fraud?
There are considerable legal risks of counterfeiting and fraudulent sellers when acquiring precious metals. Buyers should ensure they only purchase from reputable, registered dealers. In the event of proven misdelivery or fraud, civil law claims arise from purchase law (§§ 433 ff. BGB) and, if applicable, from tort law (§§ 823 ff. BGB). In cases of counterfeiting, criminal prosecution of the seller may also occur; buyers should report such cases to law enforcement authorities. It is advisable to demand certificates of authenticity and supporting documentation when buying precious metals, and, if necessary, have the goods verified by independent third parties. The burden of proof for authenticity generally lies with the buyer, unless the seller has provided specific guarantees or assurances.
