China introduced new VAT rules for the gold market from 1 November 2025 to 31 December 2027. Gold traded directly on the Shanghai Gold Exchange remains VAT-exempt, but when physical gold is withdrawn, treatment now differs: investment gold keeps the 13% VAT on value-added, while jewellery production can only deduct 6% instead of 13%. This raises jewellery manufacturing and retail costs, likely softening demand and pressuring smaller jewellers, while more investment gold purchases may shift toward SGE members such as banks. Overall, jewellery demand may decline, while investment gold demand remains stable or increases.
China's New VAT Rules Reshape Gold Market: Higher Costs for Jewellery
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Author: Ljubica Blagojević
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Content accuracy validation date:
17.11.2025
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For investment products (e.g., branded gold bars), SGE members continue to pay 13% VAT only on the value-added portion, and pricing remains broadly unchanged. But SGE members can no longer issue special VAT invoices when reselling to non-members, which means non-member clients cannot claim input VAT deductions. This will likely shift more investment gold purchasing directly to SGE members, such as commercial banks.
For non-investment uses (e.g., gold jewellery manufacturing), the deductible input VAT has effectively been reduced from 13% to 6%, raising the net VAT burden and increasing the final sale price of jewellery. SGE clients (non-members) face the same treatment, meaning smaller jewellers and wholesalers will experience higher costs and pass these to consumers.
Market Impact
- Gold jewellery is expected to become more expensive, which may weaken demand, especially given jewellery’s historical sensitivity to rising gold prices.
- Some consumers may shift from jewellery to investment gold bars and then have them custom-crafted, avoiding part of the VAT increase.
- Bar/coin investment demand is largely unaffected, and may even strengthen, especially through SGE-member channels which retain VAT advantages.
- The price gap between new jewellery and buy-back prices will widen, discouraging jewellery recycling.
- Smaller retailers and non-SGE-member distributors will be under the most margin pressure, likely accelerating industry consolidation and pushing brands toward design and craftsmanship innovation rather than price competition.
The reform raises costs in the jewellery segment while leaving investment demand mostly intact and may increase the market dominance of SGE members. With household savings high and economic uncertainty persisting, China’s gold investment demand is likely to remain strong, while jewellery consumption may face headwinds, shifting consumer preferences toward investment bars and more innovative, affordable jewellery designs.
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