Core Viewpoint - The new tax policy on gold transactions aims to clarify the value-added tax (VAT) details for standard gold trading through the Shanghai Gold Exchange and Shanghai Futures Exchange, effective from November 1, 2025, until December 31, 2027 [2][3]. Group 1: Impact on Market Participants - The new policy introduces detailed management of physical gold delivery, distinguishing between "investment use" and "non-investment use," and adjusts VAT regulations to encourage on-exchange gold trading [3][5]. - Three types of market participants will be affected: 1. Members and clients of the Shanghai Gold Exchange and Shanghai Futures Exchange must strictly declare the purpose of their transactions [11]. 2. Gold investors can reduce their tax burden through exchange transactions, encouraging a shift from off-exchange to on-exchange trading [14][15]. 3. Downstream businesses in the gold processing and retail industry may face increased costs, which they might pass on to retail prices [16][17]. Group 2: Tax Policy Details - The policy specifies that members or clients trading standard gold through the exchanges will enjoy VAT exemptions on sales, with different tax treatments based on whether physical delivery occurs [5][9]. - For investment purposes, VAT deductions will be interrupted at the sales stage, while for non-investment purposes, the input tax deduction rate will decrease from 13% to 6% [5][6]. - A strict usage management mechanism is implemented to prevent tax arbitrage, requiring members to report any changes in the intended use of gold within six months [7][8]. Group 3: Historical Context and Policy Intent - The evolution of China's gold tax policy is closely linked to the reform of the gold market system, transitioning from a planned economy to a market-oriented approach [9][10]. - The intent of the new policy is to guide gold trading towards on-exchange transactions, enhancing the transparency and regulatory efficiency of the market [10][31]. Group 4: Expected Market Reactions - The new tax policy is expected to lead to an increase in terminal prices for gold products, with estimates suggesting a rise of approximately 12.8% for investment gold and 4.2%-6.2% for non-investment gold [24][26]. - The policy aims to encourage compliance and reduce the grey areas in tax practices, potentially leading to a more standardized and regulated gold market [30].