Jewelry retailers required to issue cash receipts on gold transactions to prevent tax evasion starting 2014
A gold exchange will be opened at the Korea Exchange (KRX) in the first quarter of 2014.(photo:KRX)
The Financial Services Commission (FSC) said a gold exchange will be opened at the Korea Exchange (KRX) in the first quarter of 2014 so that spot gold can be traded like listed stocks.
Coinciding with the gold exchange, jewelry retailers will be required to issue cash receipts on gold transactions to step up surveillance on undocumented trading for the purpose of evading value added taxes, Seo Tae-jong, director general of the Capital Markets Bureau at the FSC, said.
The government and the ruling Saenuri Party finalized plans to open a spot gold market and regulate undocumented gold transactions during their meeting on July 22. The participants of the meeting representing the government included FSC Chairman Shin Je-yoon and Vice Minister of Strategy and Finance Lee Suk-joon, while among those on hand from the ruling party were Saenuri Party floor leader Rep. Choi Kyung-hwan, Rep. Kim Ki-hyun, chairman of the Saenuri Party Policy Committee, and Rep. Na Seong-lin, chairman of the Saenuri Party 3rd Policy Coordination Committee.
The FSC said the KRX will be charged with the overall operation of the spot gold market, while the Korea Securities Depository will be in charge of the depositing and withdrawing of gold products. Korea Minting, Security Printing & ID Card Operating Corp. (KOMSCO) is assigned with the evaluation of gold producers and quality certification.
The participants of the spot gold market will be gold smelters, refiners, importers, distributors, goldsmiths, and financial institutions. If they are associated with the market, they will be allowed to participate in gold transactions. Member companies will be allowed to serve as go-betweens for non-member companies.
Sellers can submit selling sheets in the case they have already deposited gold, while buyers are required to deposit an amount corresponding to a given percentage of their purchase amounts. Those involved in gold transactions shall be punished under criminal and civil codes for unfair practices such as price manipulation, similar to those imposed for stock market violations.
The government and the ruling party agreed to give no-tariff treatment to importers of gold being supplied to the spot gold market to invigorate the market. Gold business proprietors will be given tax reductions according to their utilization of the spot gold market.
The government plans to overhaul the value added tax and the taxation system to normalize the operation of the spot gold market. In the case the deposited gold is transacted on the spot gold market, no valued added tax will be imposed. The gold depository will impose a value added tax on gold when it is withdrawn. The government plans to exempt gold transaction and deposit fees until the spot gold market is normalized, and member companies’ brokerage fees will be minimized.
Only the gold products produced and processed by businesses certified by KOMSCO will be put on the spot gold market. Imported gold to be put on the market will be handled by companies, which are selected by the KRX among the picks by the London Bullion Market Association (LBMA), the international trade association that represents the market for gold and silver bullion. KOMSCO will make regular inspections into the authenticity of imported bullion.
As part of efforts to prevent undocumented gold transactions, jewelry retailers are required to issue cash receipts, while revenues of self-employed businessmen obliged to issue digital tax returns will be lowered from 1 billion won to 300 million won.
Korea Customs Service will inaugurate a gold information analysis team as part of efforts to beef up crackdowns on gold smugglers. The government plans to reinforce customs clearance procedures such as certificates of origin and purity on imported gold bullion.
Currently, 100 tons to 110 tons of gold are in circulation in Korea. Out of the total, 55 tons to 70 tons are traded clandestinely, the FSC estimated. The commission put the tax evasions stemming from undocumented transactions of gold at an estimated 300 billion won.
Dir. Gen. Seo of the FSC said preparations for the opening of the spot gold market will be made in the second half of this year, and authorities will ramp up crackdowns on undocumented gold transactions after its launch.