mz COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(92) 441 final 
Brussels,27 October 1992 
Proposal for a 
COUNCIL DIRECTIVE 
SUPPLEMENTING 
THE COMMON SYSTEM OF VALUE ADDED TAX 
AND AMENDING DIRECTIVE 77/388/EEC 
- SPECIAL SCHEME FOR GOLD -
•«f^m»?»™? (presented by the Commission) 
ï*'«iï;"S:^ 
^o- -
EXPLANATORY MEMORANDUM 
I. INTRODUCTION 
Under the sixth VAT Directive, all transactions relating to gold 
carried out by taxable persons are in principle taxable (except those 
referred to in Articles 14(1)(j) and 15(11)). However, on the basis 
of Article 28(3) (b) and point 26 of Annex F, Member States may, for a 
transitional period, maintain existing exemptions relating to gold 
other than for industrial use. 
In its initial proposal for an eighteenth VAT Directive, the 
Commission had envisaged abolishing the said derogation with effect 
from 1 January 1986. In the face of objections from Parliament, the 
Commission conceded that, in view of the specific nature of this 
economic sector, the question of VAT on gold would have to be 
examined in more detail and that an ad hoc proposal would have to be 
presented. 
The eighteenth Council Directive adopted on 18 July 1989 requires the 
Commission to present proposals on the abolition of the remaining 
derogations in Annexes E and F (including, consequently, the one 
relating to gold other than for industrial use), in view of the 
distortions of competition which exist or might arise as the internal 
market is completed. Most of these remaining derogations are dealt 
with in a proposal for a new Directive presented by the Commission to 
the Council on 22 July 1992. In the case of gold, however, the 
Commiseion undertook, given the complexity of the subject, to propose 
an ad hoc 'Hr*>ctive. 
A coherent proposal on gold is made all the more necessary by the 
existing differences between Member States which result not only from 
the said transitional derogation for so-called investment gold but 
also from the wide variety of tax schemes applicable to gold in 
general, for example under the simplification measures referred to in 
Article 27. 
Significant differences can be noted between the Member States' 
respective laws and special features of taxation in some Member 
States: 
- Some Member States which tax gold are at a disadvantage vis-à-vis 
others which exempt it. There is a tendency to stock gold in the 
latter, while the former in addition find themselves unable to 
track transactions in securities representing that gold. 
- Significant differences in the levels of taxation between 
Member States have given rise to situations in which letter-box 
companies are formed for the purposes of importing gold from low-
tax or tax-free countries and then reselling it with VAT and 
disappearing before paying over the tax to the Exchequer. Some 
Member States have already been authorized, under Article 27, to 
take measures aimed at limiting this fraud. 
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In order to, as far as possible, rule out distortions of competition 
and fraud, the Commission proposes specific rules through the 
insertion into the Sixth Directive of an Article 26a. An Article 28o 
has also been inserted- to take account of the transitional 
arrangements established by Directive 91/680/EEC on the abolition of 
fiscal frontiers. At the same time, point 26 of Annex F to the Sixth 
Directive is deleted. 
II. ARTICLE 1 
(INSERTION OF ARTICLE 26a) 
A. SCOPE 
The scope covers only supplies and the provision of services. 
Importation is not included as a chargeable event because the normal 
rules will apply in that case, including the provision in the second 
subparagraph of Article 23 of the Sixth Directive allowing an option. 
Intermediaries 
The services of intermediaries, i.e. persons acting on behalf and for 
the account of others, should be made subject to the same 
arrangements as laid down for the supplies of goods to which they 
relate. This is because, given the special scheme set up, in 
particular the exemption of investment gold, sales and the services 
relating to those sales are to be placed on an equal footing so as to 
avoid affecting transactions in the gold itself. 
Book gold 
This is gold represented by securities (gold certificates) or 
deposited in accounts (gold accounts). In both cases, the holder is 
entitled to a quantity of gold stocked at a financial institution. 
Certificates may confer a right of ownership or claim, be registered 
or made out to the bearer, and relate to identified or fungible gold. 
In the case of an ownership certificate, the issue and any transfers 
of the security amount strictly speaking to a supply of goods at the 
place where the gold is situated; by contrast, in the absence of any 
other provisions (see point D.2. below), physical delivery of the 
gold in exchange for the certificate cannot be considered to 
constitute a supply of goods because the gold has already been 
transferred when the certificate was itself transferred. 
In the case of a certificate of claim, the issue and any subsequent 
transfers constitute a supply of services (quite distinct from those 
of intermediaries). 
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Whatever the nature of these certificates, all these transactions 
fall within the scope of the Directive being proposed as the supply 
of either goods or services. 
Gold accounts, on the other hand, are evidenced by a deposit contract 
(supply of a service). This contract may be preceded by a supply of 
gold in cases where the depositor does not hand over the gold himself 
but buys it at the bank which opens the account. Transfers of that 
gold or a part of it to other gold accounts must be regarded as 
supplies of goods. Withdrawal of the gold does not in itself 
constitute a chargeable event since the gold has either already been 
supplied by the bank or has been handed over by the holder of the 
account. Supplies of gold from a gold account are not explicitly 
mentioned because they are covered by the first indent, which deals 
with supplies in general. 
The futures market and options 
Futures contracts embody an obligation to sell or buy a given 
(predetermined) quantity of gold at a specified date and at a 
variable price. An option is the right to buy or sell a given 
quantity of gold at a set price at a fixed date. These obligations 
or rights constitute the supply of services up to the time when 
delivery takes place. 
B. DEFINITIONS 
These definitions are intended to delimit the scope of the two tax 
schemes described in sections C and D. The notions of gold for 
industrial use or other than for industrial use contained in Annex F 
to the Sixth Directive, have been abandoned. This is because it is 
considered that the VAT arrangements should not be based on the use 
made of the metal (and hence on the buyer's intention). The new 
concept of investment gold (which serves as a basis for exemption) is 
intended to take in transactions which, being in nature financial 
investments, do not give rise to actual consumption of the metal 
either at the final stage or at the stage of industrial use. 
Moreover, the notion of monetary gold, which, like that of industrial 
gold, is also used in some national laws, remains confined to gold 
sold to the Central Banks, in respect of which the Sixth Directive 
already provides for exemption with deduction (Articles 14(1)(j) and 
15(11)). The latter exemption, which concerns both supplies within 
the territory of the country and imports, is justified by the fact 
that, in accordance with Directive 88/361/EEC on capital movements, 
monetary gold is regarded as forming part of central banks' financial 
capital. All the other types of gold, defined in this proposal for a 
Directive as investment gold and gold other than investment gold, are 
to be regarded as goods. 
(a) Gold in general 
Gold is defined by reference to its purity so as to limit the 
scope of the proposal. 
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Furthermore, the proposal explicitly excludes certain pieces of 
gold and objects in general. This is because the value of non-
quoted pieces or pieces which do not contain a sufficient 
quantity of gold, like-that of other objects, is determined more 
by factors other than the intrinsic value of the metal (artistic, 
numismatic value, etc.). All these objects are subject to the 
normal arrangements or to the special scheme of Article 32. 
- In the case of pieces which do fall within the scope of the 
proposal, the requirement that they be quoted shows that goods 
are involved whose value changes almost in parallel with the 
price of gold. 
- Other objects may be defined by the Member States themselves. 
This does not seem to give rise to any serious problems in 
relations between Member States. Differences in rates are 
admissible, within certain limits, even for one and the same 
good, and are not always due to differences between 
Member States in how the good is classified. 
(b) Investment gold 
Starting from the definition of gold in general, as given under 
(a), the definition of investment gold calls for the simultaneous 
fulfilment of two conditions: the absence of physical delivery 
ensures that the scheme is confined to transactions which have 
the unquestionably character of a financial investment and 
investment gold is characterized by the fact that the seller has 
the status of a licensed professional. This is necessary for the 
purposes of control given the proposed exemption for this type of 
gold. It goes without saying that the scheme for investment gold 
will not apply where the sale is by a non-licensed taxable 
person, even where there is no physical delivery. 
Over and above these objective criteria, Member States may 
determine certain characteristics which investment gold must 
have, e.g. its form (ingots, bars, etc.) and the requirement that 
it be stamped. 
The notion of physical delivery may be defined by Member States 
themselves. However, care must be taken to ensure that the 
deposit of gold with a third party or indeed the seller is not 
used as a pretext for claiming that no physical delivery has 
taken place. This risk should be avoided especially where the 
gold remains deposited with the seller. If this is the case, 
physical delivery will occur when the buyer is free to take 
possession of the gold at any time without making the 
sel1er/depository responsible for the delivery itself (this is 
the case, for example, where gold is deposited by a buyer using a 
safe belonging to the seller without the seller having a right to 
inspect its contents). 
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(c) Gold other than investment gold 
Where one or other of the conditions and characteristics is not 
met, gold is no longer investment gold, although, provided it 
satisfies the definition given at (a), it does remain within the 
scope of the proposal. However, it comes under a different 
scheme from that applicable to investment gold. 
C. SCHEME APPLICABLE TO INVESTMENT GOLD 
Investment gold is to be exempted with a right to deduct input tax. 
Generalized taxation of gold does not seem appropriate where gold is 
dealt in for purely financial reasons. This is particularly true for 
transactions which do not give rise to physical delivery: if VAT were 
charged on top of the selling price, even if it is deductible, the 
gold market would be likely to be disturbed. Among such purely 
financial transactions, those carried out using securities are 
playing (or are destined to play) an increasingly large role on the 
European gold market. Given the speed at which these securities 
circulate, it would be extremely difficult, if not impossible, to tax 
the underlying gold, particularly when it is situated in a 
Member State other than the one in which the successive transfers of 
the security take place. It is true that a similar problem may arise 
for other goods; however, the small number of transactions makes all 
the difference in the latter case. 
Finally, it should be noted that exempting purely financial 
transactions reduces the risk of gold escaping to third countries and 
makes it easier to keep gold in the legal circuit. 
D. SCHEME APPLICABLE TO GOLD OTHER THAN INVESTMENT GOLD 
1. The normal scheme 
As soon as the metal fails to satisfy one or other of the 
conditions or no longer has one or other of the characteristics 
required for it to be classified as investment gold, it 
automatically falls within the category of gold other than 
investment gold. Since no exemption is provided for in that case 
(apart from those of Articles 14(1)(j) and 15(11)), the normal 
scheme applies. However, this scheme is accompanied by a number 
of special provisions, as described below. 
The requirement that the taxable purchaser holds an invoice 
showing his identification number is justified by the need to 
avoid that the taxable purchaser deducts the VAT on his purchase 
of gold and then fraudulently requests a refund under the 
arrangements described in section 4 below. 
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Application of the scheme requiring taxation obviously means that 
gold situated in a Member State must be taxed even if the parties 
to the contract are not situated there. This is a problem common 
to all goods, and Article 21 of the Sixth Directive lays down 
specific measures to cover the situation. 
2. Physical delivery classed as a supply of goods 
It is vital that the physical delivery following a supply 
exempted under the rules for investment gold be treated as a 
supply of goods. This is in order to prevent the gold from being 
used for industrial or private consumption without payment of 
VAT. 
Since there is no ou id pro guo at the actual time when physical 
delivery takes place, it is proposed that reference be made to 
the current market price. This enables all buyers of gold other 
than investment gold to be placed on ' the same footing, 
irrespective of when the supply takes place. 
3. The deductible proportion 
Treating physical delivery as a supply of goods artificially 
increases the turnover in respect of which input tax is 
deductible. The new chargeable event has been created solely for 
reasons to do with the taxation technique. It cannot therefore 
be dissociated from the previous supply which, because it did not 
give rise to physical delivery, was exempted with the right to 
deduct input tax. In order to prevent the right of deduction 
from being abused, it is proposed that when physical delivery 
takes place the turnover to be given in the numerator and 
denominator of the deductible proportion for such delivery be 
made up solely of the difference between the value of the 
exempted supply of goods and the (current) value of the physical 
delivery (positive or negative difference). 
4 to 8. Supplies of gold which have been taxed without a right of 
deduction 
One problem that has been raised is that there would be residual 
tax and double taxation when gold on which a non-deductible tax 
was charged is reintroduced into the economic circuit. 
This drawback is clearly not specific to gold since it generally 
occurs irrespective of the nature of the goods. This is the very 
justification of the special scheme proposed by the Commission 
for second-hand goods, works of art, antiques and collector's 
items. 
On a theoretical level, several solutions might be considered. 
It would seem useful to compare them and assess their 
limitations. 
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The system of generalized refund 
The basic idea behind this system is that a scheme which sets out 
to tax the margin, while being likely to solve the problem of 
double taxation in most cases, does not seem very appropriate in 
the case of gold. A closer look at economic reality shows that, 
apart from a few rare cases, the number of transactions in 
second-hand goods other than gold covered by the margin scheme 
when they are introduced into the economic circuit for the second 
time is very limited. 
By contrast, gold, as an object of investment, can be the subject 
of an unlimited number of transactions. It must be recognized 
that any system of taxing the margin minimizes but does not 
completely eliminate the effects of residual tax: it will 
continue to grow the longer the economic cycle simply because tax 
on the margin is incorporated into the price and cannot be 
deducted by the subsequent buyer. The particularly high value of 
gold and the large number of successive transactions to which it 
may be subject would amplify this phenomenon. 
Moreover, without special measures the margin system would tend 
to perpetuate itself. This is because once gold has been sold by 
a person who does not have the right of deduction, all successive 
sales of that gold by taxable persons would systematically be 
subject to the margin scheme. 
Some have also pointed to the risk of arriving at a situation in 
which the remunerative price of the seller would exceed the price 
on the stock exchange (inclusive of tax) and would therefore be 
impracticable. 
Fears have also been expressed that there might be scope for 
fraud since the taxable reseller would have an interest in 
artificially increasing the price for his purchases from private 
individuals in order to reduce the taxable margin. 
Thus, the suggestion has been made by some that residual tax be 
eliminated quite generally by refunding it when the gold is 
resold to any seller who did not have the right of deduction 
(because he is either a non-taxable or an exempted taxable 
person). 
The idea of a refund, which might be made either by the State or 
by the taxable buyer, is very attractive at first glance because 
of its neutrality. It would leave no residual tax whatever the 
length of the economic cycle or the status of the persons 
(taxable or non-taxable) in the chain. 
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However, the system of generalized refund has several drawbacks. 
(1) Assuming the refund is made by the State, if, for example, a 
private individual-having bought the gold with payment of VAT 
sells it to another private individual, the latter will 
receive it without VAT. 
(2) Assuming the refund is made by the buyer, a private 
individual selling gold to another private individual would 
be able to recover the VAT he has paid only by increasing his 
selling price accordingly. This would start another cycle of 
residual tax. To avoid this, the first private individual 
would have to transfer his right to a refund to the buyer 
(who is also a private individual). If we imagine a whole 
chain of transactions between private individuals, it is 
apparent how difficult it would be to track this right to a 
refund over time. It is easy to see the risks of fraud which 
would arise if a private individual were to claim a refund on 
the basis of an invoice, even a relatively recent one, and 
the State were unable to carry out any checks on such an 
invoice because, for example, the prescribed time-limit would 
have expired. 
Moreover, a refund is possible only if the private individual 
has received and kept an invoice issued in accordance with 
certain conditions: this might leave gold already in 
circulation outside the system. 
The system of limited refund 
To avoid the drawbacks linked to the transfer of invoices, one 
solution would be to grant a refund to a private seller only 
where he sells the gold to a taxed taxable person and where he 
has bought that gold from another taxed taxable person (taxable 
person -> private individual -> taxable person). 
This system, which would eliminate successive transfers of 
invoices, still presents the other disadvantages of the 
generalized refund system, in particular the difficulty of 
monitoring the right to a refund over time (problem of carrying 
out checks), and the risk that gold already in circulation will 
be left outside the system. 
As for the method of refund (by the State or by the taxable 
buyer), the consequences of each procedure have to be examined in 
both of the following situations. 
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(a) Under the definitive scheme : 
(aa) If the choice between the two methods (State or buyer) is 
left to Member"States, the person entitled to a refund 
might find that he is not in fact refunded. This would be 
the case, for example, where a private individual buys 
gold in a State which has opted for refund by the buyer 
and resells it in a State which has opted for refund by 
the public authorities. 
(ab) A scheme which requires that the refund be made by the 
State privileges purchases from non-taxable persons over 
those from taxable persons. This is because, since the 
non-taxable person is refunded by the State, the buyer 
does not have to prefinance the VAT as he would if he was 
buying from a taxable person. 
(ac) If, in order to avoid the problem referred to in the 
previous indent, a compulsory system of refund by the 
taxable buyer is introduced, other complications arise. 
For example, if a private individual sells to a taxable 
person, that person would be required to produce the 
purchase invoice of the private individual because 
otherwise the State would have no means of deciding 
whether a refund was justified (given that the private 
individual is not in principle subject to checks). In 
this context, there is the additional problem that if the 
private individual produces a foreign invoice issued when 
gold was purchased in a Member State other than his own, 
the taxable buyer must convert the amount in question into 
the currency of the transaction. 
(b) Under the transitional scheme 
(ba) If Member States are left to choose between the two 
methods (State or buyer), the consequences are the same as 
referred to at point (aa) above; 
(bb) If a compulsory system of refund by the State is 
introduced, the disadvantage described at point (ab) does 
not occur. In the case of sales between taxable persons, 
the buyer does not have to prefinance the VAT either under 
the intra-Community system or (according to the approach 
indicated in the section on Article 2 - Article 28o) under 
the domestic system; the same goes for purchases from a 
private individual (who is refunded by the State). 
However, there are problems with checks. In order to make 
sure that the refund is justified, the State must be able 
to impose certain obligations, such as a declaration of 
purchase by a taxable buyer. It must be recognized that 
the State granting the refund might find it difficult in 
some cases to verify the validity of such a declaration, 
particularly where it is made by a buyer from another 
Member State. Moreover, where a sale made by a non­
taxable person (or a taxable person with no right of 
deduction) is cancelled, the sum refunded by the State to 
the seller should logically be recovered, provided of 
3) 
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course that the State is aware of the cancellation. It 
must be left to Member States to find solutions to these 
problems, relying on mutual assistance. 
On the other hand, the Member State of the buyer will need 
to monitor the purchases of the latter so that it can 
check subsequent supplies. In any case, it is impossible 
from the outset to avoid all risk of undue refund. It 
should be remembered that this risk already exists in 
other areas, such as that governed by the Eighth 
Directive. 
(be) The objections outlined at point (bb) would mean that all 
obligations, including that of making the refund, would 
have to be transferred to the taxable buyer; this would be 
unacceptable because purchases from private individuals 
would be placed on a less favourable footing (because of 
the need to prefinance VAT) than purchases from taxable 
persons (where this need does not arise owing to the so-
called reverse-charge mechanism described below in section 
III-l). 
The mixed system (limited refund plus margin) 
Most of the disadvantages of the limited refund system are due to 
the difficulty of checking the right to a refund that is not 
limited in time. Hence the need to fix a limit beyond which a 
refund will no longer be admitted. Each Member State should be 
able to fix this limit by reference to the time-limit it has 
established for the purposes of checks, for example. 
Provided such a measure is introduced, the system of limited 
refund seems to be an appropriate solution to the problem of 
residual tax, while avoiding most of the above-mentioned 
problems. 
Limited refund would be granted: 
(a) Where the claimant is a non-taxable person (or a taxable 
person having no right of deduction). A refund would not be 
granted to a taxable person who had been entitled to partial 
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deduction. Otherwise many complications would arise. 
Moreover, it is precisely in order to avoid complications 
that Article 13(B)(c) of the Sixth Directive does not exempt 
goods which have been the subject of even minimal deduction, 
thus accepting a degree of double taxation. 
(b) Where a non-taxable person (or a taxable person having no 
right of deduction) resells to a taxable person with a right 
of deduction (even partial) gold he has bought from a taxable 
person who invoiced VAT to him. On resale, it will not 
matter whether the buyer has a right of total or partial 
deduction since he will be able to deduct the amount of the 
refund corresponding to his deductible proportion. 
As for the method of refund, an assessment of the pros and cons 
suggests that preference should be given, under the definitive 
scheme, to refund by the taxable buyer and under the transitional 
scheme to refund by the State. 
It would seem that this system could work in the majority of 
cases. However, a complementary solution should be sought in a 
limited number of cases where this system cannot work. 
These are as follows: 
(a) cases in which a non-taxable reseller (or a taxable reseller 
having no right of deduction) has bought the gold from 
another non-taxable person (or a taxable person having no 
right of deduction); a refund is not possible in this case 
since the person concerned cannot present an invoice 
including VAT made out in his name; 
These complications are due mainly to the difficulty of tracking 
changes in the deductible proportion. If a refund were granted 
to a taxable person having carried out a partial deduction (e.g. 
10%), the refund would initially relate to 90%. If, at the end 
of the year, the final proportion turned out to be greater than 
10%, the taxable person would have to pay back the corresponding 
tax which the State would already have refunded under the present 
special scheme. This correction might extend throughout the 
adjustment period allowed for capital goods (a bank's gold 
reserves might fall into that category). 
On the question of resale, it should be noted that the need for 
legal certainty suggested redefining the notion of "supply" (for 
the purposes of applying the refund scheme) to cover cases of 
supply carried out by non-taxable persons. This is because the 
"traditional" definition of supply is linked to the taxable 
status of the seller. 
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(b) cases in which a non-taxable reseller (or a taxable reseller 
having no right of deduction) does not present an invoice 
(e.g. because the invoice has been lost or the gold is in 
circulation); 
(c) cases in which the period of validity of the invoice, as 
determined by the Member State for refund purposes, has 
expired. 
In all cases in which refund becomes impossible, it is obvious 
that a non-taxable reseller will transfer his input tax to the 
buyer by incorporating it into the selling price. In this 
situation, the latter would inevitably be subject to the normal 
VAT scheme (if he is taxable) when he sells the gold himself. 
This would start a new cycle of residual tax and double taxation. 
It is consequently proposed that when a taxable persons resells 
gold in respect of which his non-taxable * seller (or taxable 
seller without any right of deduction) has not claimed a refund, 
the margin scheme will apply (with a right of option for the 
normal scheme when the gold is supplied to another taxable person 
in order to ensure that the latter is able to make a total or 
partial deduction). 
These arrangements would not be difficult to apply because 
- under the definitive scheme (refund by the buyer), the buyer 
can easily assess whether the conditions have been met because 
he can make a refund only on the basis of the purchase invoice 
of the person selling him the gold; 
- under the transitional scheme (refund by the State), the seller 
must hold a declaration by the buyer in order to receive a 
refund. 
III. ARTICLE 2 
(INSERTION OF TITLE ZVIb AND OF ARTICLE 28o) 
1. The reverse-charge mechanism 
A mechanism under which the taxable buyer is designated as liable 
for the tax (the reverse-charge mechanism) is frequently used as 
a means of combating fraud in certain economic sectors. Given 
the characteristics of the gold market, particularly as far as 
the risks of fraud are concerned, a case can be made for allowing 
such a mechanism to be introduced. It would make it possible for 
the State to keep track of the gold's movements more easily and 
be reasonably certain that the buyer declares his purchase since 
this would be a condition for deduction. 
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Moreover, it must be remembered that, under the transitional 
scheme, intra-Community transactions between taxable persons 
relating to gold other than investment gold are subject to tax in 
the Member State of destination, the person acquiring the gold 
being liable to pay it. As a taxable person, the latter may 
immediately deduct the tax without any need to pre finance it and 
within the limits of his right of deduction. Under these 
circumstances, the domestic market might be placed in a less 
favourable position to the extent that taxable persons would do 
better to procure gold on the intra-Community market in order to 
avoid having to prefinance the tax. This risk, which obviously 
applies not only to gold, seems unacceptable in this area given 
the very high value of the metal. The reverse-charge mechanism 
would place domestic and intra-Community transactions on an equal 
footing, provided of course that no prefinancing is required. 
Member States are free to decide whether or not to introduce the 
mechanism on their territory and, if they do so, may determine 
its scope. 
2. Application of the mixed system fH-f+ed refund plus margini 
during the transitional period ~~ 
During the transitional period, the refund system envisaged for 
gold which is supplied after having been taxed without any right 
of deduction is that of refund by the State. The reasons for this 
have been explained above in the chapter entitled "The system of 
limited refund", point (bb). 
The reason for the second subparagraph is given in the same 
chapter (Member States choose the appropriate means to ensure 
that the refund is justified). 
The provision of the third subparagraph is intended to prevent 
the person acquiring the gold from having to verify that the 
refund is justified or to wait and see whether the refund to his 
seller is duly made before deciding which scheme to apply (the 
normal or margin schemes) to his own sales. He is thus relieved 
of responsibility as soon as he has presented his declaration of 
purchase. 
M 
PROPOSAL FOR A 
COUNCIL DIRECTIVE 
SUPPLEMENTING THE COMMON SYSTEM OF VALUE ADDED TAX 
AND AMENDING DIRECTIVE 77/388/EEC 
- SPECIAL SCHEME FOR GOLD 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic 
Community, and in particular Article 99 thereof, 
Having regard to the proposal from the Commission, 
Having regard to the opinion of the European Parliament, 
Having regard to the opinion of the Economic and Social Committee, 
Whereas, under the Sixth Council Directive 77/388/EEC of 17 May 1977 
on the harmonization of the laws of the Member States relating to 
turnover taxes - Common system of value added tax: uniform basis of 
1 2 
assessment, as last amended by Directive 91/680/EEC, transactions 
concerning gold are in principle taxable although, on the basis of 
the transitional derogation provided for in Article 28(3)(b) in 
conjunction with point 26 of Annex F to the said Directive, 
Member States may continue to exempt transactions concerning gold 
other than gold for industrial use; 
Whereas the Eighteenth Council Directive (89/465/EEC of 
3 18 July 1989), while abolishing certain other derogations allowed 
1 OJ No L 145, 13.6.1977, p. 1. 
2 OJ No L 376, 31.12.1991, p. 1, 
3 OJ NO L 226, 3.8.1989, p. 21. 
-ir-
under the same Article 28, maintained the one relating to gold other 
than gold for industrial use; whereas, in Article 3 of the said 
Directive, the Council undertook to review the situation with regard 
to the other derogations and, acting on a Commission proposal, to 
decide whether these derogations should be abolished, having regard 
to any distortions of competition which have resulted from their 
having been applied or which might arise from measures to complete 
the internal market; whereas the Commission, while providing for the 
abolition of most of the remaining derogations in its new proposal 
for a Directive of 22 July 1992, has preferred to draw up a specific 
proposal concerning gold. 
Whereas application by some Member States of the transitional 
derogation provided for in the case of gold other than gold for 
industrial use is the cause of certain distortion of competition; 
whereas these distortions also arise with regard to industrial gold 
given the diversity of tax arrangements applied by the various 
Member States; 
Whereas a special scheme capable of reconciling the goal of taxation 
with the need to combat fraud and avoid parallel markets should be 
established within the context of the completion of the internal 
market from 1 January 1993, whereas transactions of a financial 
nature should be afforded special treatment under this special scheme 
with a view to encouraging investment; 
Whereas, given the nature and high price of gold, a mechanism should 
be introduced which minimizes the amount of tax included in the price 
where the seller has not been able to deduct it, in order to avoid 
double taxation, 
HAS ADOPTED THIS DIRECTIVE: 
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Article 1 
The following Article 26a shall be added to Directive 77/388/EEC. 
"Article 26a. 
Special scheme for cold 
A. SCOPE 
Member States shall apply value added tax to the following 
transactions, in accordance with the provisions of this Article: 
- the supply of gold and the supply of related services by 
intermediaries; 
the issue, transfer and negotiation of securities involving a 
right of ownership or claim in respect of gold; 
- transactions concerning gold involving futures contracts or call 
or put options contracts, and the supply of related services by 
intermediaries. 
B. DEFINITIONS 
The following definitions shall apply for the purposes of this 
Article. 
(a) "Gold" means gold of a purity equal to or greater than 900 
thousandths and pieces of gold of a purity equal to or greater 
than 900 thousandths and quoted on one of the markets of the 
Community. Gold objects as defined by the Member States are 
excluded from this definition. 
(b) "Investment gold" means gold as defined at point (a), whether or 
not represented by securities, provided the transaction does not 
give rise to the physical delivery of the goods and is carried 
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out by licensed professionals. Member States shall determine the 
characteristics of the goods, in particular as regards their form 
and the certification of their degree of purity, the conditions 
for the licensing of professionals and the circumstances in which 
physical delivery is deemed to have taken place. Physical 
delivery shall in any case be deemed to have occurred where the 
gold is deposited on behalf of the buyer or for his account with 
a third party or with the seller in the event of the latter no 
longer being considered responsible for the gold in question. 
(c) "Gold other than investment gold" means gold as defined at point 
(a) which does not meet one or other of the conditions or 
characteristics referred to at point (b). 
C. SCHEME APPLICABLE TO INVESTMENT GOLD 
1. Member States shall exempt the transactions referred to under A 
and concerning investment gold. 
2. Member States shall grant every taxable person the right to the 
deduction or refund of the value added tax referred to in 
Article 17(2) in so far as the goods and services are used for 
the purposes of the transactions referred to in paragraph 1. 
D. SCHEME APPLICABLE TO GOLD OTHER THAN INVESTMENT GOLD 
1. Subject to the following provisions, the scheme applicable to the 
transactions referred to under A and concerning gold other than 
investment gold shall be the normal scheme. 
As far as supplies of gold referred to in the previous paragraph 
are concerned, the taxable purchaser must, in order to exercice 
his right of deduction, hold an invoice which shows, in addition 
to the information required under Article 22(3)(b), his VAT 
identification number. 
2. The physical delivery of gold shall be treated as a supply of 
goods where the last transaction concerning that gold has been 
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exempted in accordance with the provisions under C above. The 
taxable amount shall be the price of the gold resulting from the 
selling rate obtaining on the most representative market or 
markets in the Member State concerned at the time when the tax 
falls due, or from a rate determined by reference to that or 
those markets, in accordance with the procedure laid down by the 
Member State in question. Such supply shall be deemed to have 
been carried out by the taxable person who carries out the 
physical delivery. 
3. For the purposes of calculating the proportion deductible under 
Article 17, the amount of the turnover attributable to the 
delivery referred to in paragraph 2 shall be taken into account 
only within the limits of the difference between the taxable 
amounts of the two transactions referred to in the first sentence 
of that same paragraph. 
4. Member States shall grant to any non-taxable person or to any 
taxable person not having had any right of deduction a refund of 
the value added tax charged on his purchase of gold, provided 
that the gold is supplied by that same person to a taxable person 
having a right of deduction and established in the Community, 
hereinafter referred to as the taxable purchaser. 
For the purposes of the previous subparagraph, supply shall be 
considered to constitute the transfer for consideration of the 
right to dispose of the gold as owner. 
5. The refund provided for in paragraph 4 shall be made by the 
taxable purchaser in accordance with the following conditions: 
(a) the taxable purchaser shall draw up, on behalf of the person 
carrying out the supply, an invoice or other document serving 
as an invoice in accordance with the provisions of 
Article 22(3); 
(b) the taxable purchaser shall procure and retain the original 
copy of the invoice or other document serving as the invoice, 
drawn up in accordance with Article 22(3), on which the tax 
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to be refunded shall be indicated. Member States shall 
determine the time-limit beyond which the refund shall no 
longer be permitted. 
6. In the situation provided for in paragraph 5, the taxable 
purchaser shall be authorized, in accordance with the provisions 
of Article 17 and in line with the procedures laid down by the 
Member States, to deduct the amount he has refunded from the 
value added tax for which he is liable. 
7. Where no refund is made, the taxable amount for the subsequent 
supply carried out by the taxable purchaser shall be the 
difference between the selling price exclusive of value added tax 
and the purchase price including tax. 
However, Member States may, in order to simplify collection of 
the tax and subject to the consultation provided for in 
Article 29, adopt as the taxable amount the difference over each 
tax period between the total amount of supplies exclusive of tax 
and the total amount of purchases including tax. Application of 
this provisions may not lead to distortions of competition. 
The tax attributable to the supplies referred to in the previous 
subparagraphs may not be separately indicated on the invoice or 
other document serving as the invoice. In any case, this tax may 
not be deducted at the subsequent stage. 
The taxable purchaser, as referred to in this paragraph, may, for 
each of his supplies to taxable persons having a right of 
deduction, opt for the normal value added tax scheme. 
8. Where the normal scheme and the special scheme are applied 
jointly, the taxable purchaser shall keep his accounts in such a 
way as to enter separately the transactions subject to each of 
these schemes, according to the procedures laid down by each 
Member State." 
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Article 2 
The following Title XVTJb and Article 280 shall be added to 
Directive 77/388/EEC. 
"TITLE XVlb 
Transitional scheme for gold 
Article 280 
Without prejudice to other Community provisions, the following 
provisions shall apply during the transitional period referred to in 
Article 281. 
1. By way of derogation from Article 21(1) (a), as amended by 
Article 28g, where a supply is made to a taxable person having 
the right of deduction, Member States may, according to the 
procedures and conditions they lay down, designate the purchaser 
as liable for the value added tax. Where they take up this 
option, Member States shall take the measures necessary to ensure 
that the person designated as liable meets the obligations of 
submitting a return and paying the tax in accordance with 
Article 22. 
2. By way of derogation from Article 26a(D)(5), the refund referred 
toin the said paragraph shall be made by the public authorities. 
This refund and any decisions relating to it shall be carried out 
in accordance with Article 7(4) of Directive 79/1072/EEC. In 
order to qualify for the refund, a non-taxable person or a 
taxable person having no right of deduction shall submit an 
application accompanied by: 
- the original copy of the invoice, made out in accordance with 
Article 22(3), on which the tax to be refunded shall be stated; 
Member States shall determine the time-limit beyond which the 
refund shall no longer be permitted; 
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- a declaration issued by the taxable purchaser certifying that 
the purchase has taken place. 
Member States shall take the measures necessary to ensure that 
tax refunded is recovered where it has been unduly refunded or 
where a supply was cancelled. 
For the purposes of the scheme applicable to a subsequent supply 
by the taxable purchaser, the refund shall be deemed to have been 
made as soon as the taxable purchaser has issued the declaration 
provided for in the second indent of the first subparagraph. " 
Article 3 
Point 26 of Annex F to Directive 77/388/EEC shall be deleted. 
Article 4 
1. Member States shall adapt their present value added tax 
arrangements to this Directive. 
They shall bring into force such laws, regulations and 
administrative provisions as are necessary for their arrangements 
thus adapted to enter into force on 1 January 1993. 
2. Member States shall inform the Commission of the provisions which 
they adopt to apply this Directive. 
3. Member States shall communicate to the Commission the texts of 
the provisions of national law which they adopt in the field 
governed by this Directive. 
4. When Member States adopt such measures they shall include a 
reference to this Directive or shall accompany them by such a 
reference on the occasion of their official publication. The 
manner in which such references shall be made shall be laid down 
by the Member States. 
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Article 5 
This Directive is addressed to the Member States, 
Done at Brussels, 
For the Council 
The President 
li 
Financial statement 
Under the present proposal, investment gold will be exempt from VAT 
with deduction of input tax. At the moment, some Member States tax 
such gold while others exempt it under a derogation from the sixth VAT 
Directive that permits exemption on a transitional basis for "gold 
other than gold for industrial use". Since this transitional 
derogation results in financial compensation being paid to the 
Communities by the beneficiary Member States, general application of 
the exemption will give rise to a fall in own resources owing to the 
fact that compensation will no longer be payable. 
As regards gold not classed as investment gold, the present proposal 
provides for generalized taxation. For such gold, the scope of 
taxation will need to be extended (boosting own resources) since 
certain transactions which are exempt at the moment in some 
Member States as investment gold would, under the new scheme, have to 
be taxed (e.g. sales of ingots or pure gold with physical delivery of 
the metal). 
M 
Assessment of impact on SMEs and employment 
The purpose of the present proposal for a Directive is twofold: 
- to abolish a transitional provision in Directive 77/388/EEC allowing 
some Member States to continue to exempt gold other than gold for 
industrial use-, 
- to lay down Community rules for a special VAT scheme applicable both 
to investment gold and to gold other than investment gold. 
I. Administrative obligations on businesses arising from application of 
the present Directive 
Obligation to submit a tax declaration also in cases where a 
Member State exercises the option provided for in Article 22(9) of 
the sixth VAT Directive, namely, exemption from all obligations for 
businesses carrying out only exempt transactions. 
I I . Advantages for businesses 
Arrangements for investment gold: a firm selling investment 
gold does not invoice VAT and can deduct VAT paid on its 
purchases; a firm buying investment gold does not prefinance 
VAT; 
Arrangements for gold other than Investment gold: taxation of 
all transactions involving such gold allows businesses to 
deduct VAT paid on their purchases; moreover, for a 
transitional period, businesses buying such gold can be 
exempted from prefinancing VAT by the Member State concerned. 
Residual tax will be abolished by virtue of taxation and, in 
the case of gold which is reintroduced into the economic 
circuit after being taxed without any right to deduct input 
tax, will be significantly reduced. 
III. Are there any drawbacks for businesses in terms of additional 
costs? 
None 
IV. Impact on employment 
None 
V. The two sides of industry have not been consulted. 
VI. The present proposal is necessary in order to combat fraud and 
to avoid the distortions of competition that may result from 
divergences between Member States' laws. 

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ISSN 0254-1475 
COM (92) 441 final 
DOCUMENTS 
EN 02 
Catalogue number : CB-CO-92-458-EN-C 
ISBN 92-77-48366-0 
Office for Official Publications of the European Communities 
L-2985 Luxembourg