China scraps platinum tax break for state-owned giant

Currently, China Platinum is the only entity allowed to import the metal without paying a 13% VAT

China will phase out a long-standing platinum tax rebate for a state-owned giant, potentially opening up the market to new entrants.

The government will from Nov 1 start collecting value-added tax (VAT) on sales of domestically produced and imported platinum, as well imports of platinum jewellery, the Ministry of Finance said in a statement on Friday (Oct 17). Currently, China Platinum is the only entity allowed to import the metal without paying a 13 per cent VAT, making it effectively the only player who can do so competitively.

Platinum prices on the Shanghai Gold Exchange jumped to a premium of more than 10 per cent to global benchmark spot prices on Monday.

The change to the policy that preserved what was effectively a monopoly on platinum imports should benefit the industry in the long run, said Weibin Deng, regional head of Asia-Pacific at the World Platinum Investment Council. As new entrants begin trading platinum on an equal footing, a more liquid two-way market should develop, enabling industrial users of platinum to hedge their exposure to falling prices, he said.

“Removing the VAT refund actually is quite a significant step for the platinum market in China,” Deng said. Potential rival firms “had been suffering for many years because the policy was only granted to one particular company”, he said.

China Platinum did not immediately respond to a request for comment outside normal business hours.

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Platinum is one of the best-performing commodities this year, surging about 77 per cent amid market tightness. Demand for the metal, used in catalytic converters and laboratory equipment, could outstrip supply for the rest of this decade, according to Bloomberg Intelligence.

The jump in premiums for platinum in Shanghai could spark a rush of metal into China before the Nov 1 deadline, said Jacob Smith, an analyst at Metals Focus. Longer term, the tax “will inevitably weigh on flows to the country”, he said.

The same announcement on Friday delivered a 50 per cent VAT rebate for products used in offshore wind power that will start from next month and extend to the end of 2027. Wind is a favoured industry as China aims to boost renewable energy and accelerate the country’s energy transition.

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By contrast, some of the announced rebate withdrawals, which also apply to some diamond transactions, coalbed methane extraction and aircraft maintenance services, have been around for many years. The ministry statement refers to tax regulations on platinum dating back to 2003. BLOOMBERG