Your Guide to Tax on Gold and Silver Krugerrands in South Africa

Whether you're buying Krugerrands as an investment or building a precious metals collection, understanding the tax implications can save you money and headaches. Here's what every South African buyer and seller needs to know.

The VAT Advantage of Gold Krugerrands

One of the biggest benefits of buying gold Krugerrands is the VAT exemption. When you purchase intact gold Krugerrand coins "as such," you pay zero VAT under Section 11(1)(k) of the VAT Act. This is a significant advantage, it means you're not paying an extra 15% upfront just to own the coins.

However, this benefit doesn't extend to silver. Silver Krugerrands and silver bullion attract the standard 15% VAT when you buy them. This upfront cost can impact your return on investment, so factor it into your calculations before purchasing silver.

Proof vs Bullion: Does It Matter for Tax?

Both proof and bullion Krugerrands are treated similarly for income tax and capital gains tax (CGT) purposes, the tax you pay depends on whether you're investing or trading, not whether the coin is proof or bullion.

Where they differ is VAT treatment. Bullion gold Krugerrands qualify for zero-rating, but many proof and numismatic coins may be standard rated at 15% VAT, depending on how they're classified and supplied. Always confirm the VAT treatment with your dealer before purchasing.

When You Sell: Capital Gains Tax or Income Tax?

The tax you pay when selling your Krugerrands depends on your intention and activity:

For Investors (Most People)

If you're buying and holding Krugerrands as a long-term investment, any profit when you sell is subject to Capital Gains Tax (CGT):

• Individuals: You include 40% of your net capital gain in your taxable income, with an effective maximum tax rate of around 18%

• Annual exclusion: The first R40,000 of capital gains each tax year is excluded

• Companies and trusts: Higher inclusion rates apply (80%), resulting in effective rates around 21.6% to 36%

Gold and platinum coins are expressly recognized as assets for CGT purposes, so you're clearly covered under the rules.

For Traders and Dealers

If you're buying and selling frequently with the intention to trade, essentially running a business—your profits are taxed as ordinary income at your marginal tax rate, which can be significantly higher than CGT rates. Case law involving Krugerrands provides guidance on whether your activity constitutes investment or trading.

The key difference: Occasional sales from your personal collection? CGT. Regular buying and selling for profit? Income tax.

Special Considerations

Personal-Use Asset Rules Don't Help

Some people hope the "personal-use asset" exemption might shelter their coins from tax, but this doesn't work for gold and platinum Krugerrands. Since their value comes mainly from the metal content rather than personal enjoyment, they don't qualify for this exclusion.

Capital Losses Are Limited

If you sell Krugerrands at a loss, be aware that losses on "collectables" can be ring-fenced, limiting your ability to offset them against other gains.

Record-Keeping Is Essential

To properly calculate your tax liability and prove your costs to SARS, you must keep:

• Purchase invoices showing acquisition costs

• Purity specifications and certificates

• Documentation proving zero-rating eligibility (for VAT vendors)

• Records of all sales and proceeds

These records establish your base cost, the original purchase price, which is crucial for calculating capital gains.

Other Taxes to Consider

Gifting Coins

If you gift Krugerrands to someone, Donations Tax applies at 20% (up to R30 million) or 25% (above R30 million). Natural persons have an annual exemption of R100,000, which can shelter smaller gifts.

Estate Planning

Krugerrands form part of your dutiable estate for Estate Duty purposes, taxed at 20% (up to R30 million) or 25% (above that threshold). Proper estate planning can help minimize this burden on your heirs.

Practical Tips for Buyers and Sellers

If you're buying for investment:

• Choose gold Krugerrands over silver to avoid the 15% VAT on purchase

• Keep all documentation for future CGT calculations

• Understand that you'll face CGT when you eventually sell at a profit

If you're buying silver:

• Budget for the 15% VAT upfront

• CGT still applies when you sell at a profit, just like gold

If you're trading regularly:

• Register appropriately with SARS

• Treat your inventory as trading stock

• Be aware that the Domestic Reverse Charge (DRC) may apply to certain gold supplies between VAT vendors

If you're unsure:

• Assume 15% VAT applies unless the dealer confirms the specific zero-rating

• Treat sales as CGT events unless your trading activity clearly indicates a business

  
  

The Bottom Line

Gold Krugerrands offer a genuine tax benefit with zero-rated VAT on purchase, making them cost-effective for investors. When you sell, expect to pay CGT on your gains, with a generous annual exclusion of R40,000. Silver doesn't enjoy the same VAT advantage, so factor in the 15% upfront cost.

The key to managing your tax obligations is simple: keep excellent records, understand whether you're investing or trading, and don't assume all precious metals receive the same tax treatment. When in doubt, consult with a tax professional who understands the nuances of precious metals taxation in South Africa.