The Final Word on Recycled Gold: Constitutional Court Upholds Standard Rate VAT

For years, the South African gold industry has grappled with a complex tax question: does refining scrap gold into pure bars “reset” its status for VAT purposes? The Constitutional Court has finally provided a definitive answer in the case of Lueven Metals (Pty) Ltd v Commissioner for SARS. This unanimous judgment marks a significant shift for businesses involved in the precious metals supply chain, ending a long-standing dispute over the interpretation of the VAT Act.

Why This Matters to South African Businesses

The ruling is a major victory for the South African Revenue Service (SARS) and carries heavy implications for any business dealing in gold, scrap metal, or refining services. At the heart of the matter is Section 11(1)(f) of the VAT Act, which allows for a 0% VAT rate (zero-rating) on gold supplied to the South African Reserve Bank, the South African Mint, or registered banks—but only under very specific conditions.

Many businesses, like Lueven Metals, operated on the assumption that once scrap jewelry or “recycled” gold was refined into a pure form (such as a 99.9% pure gold bar), it qualified for zero-rating. The Constitutional Court has now rejected this view. The court ruled that if gold has ever been manufactured into a non-prescribed form—such as jewelry, ornaments, or coins—it is permanently disqualified from zero-rating, regardless of how many times it is subsequently refined or what its final purity level may be.

For businesses, this means that the 15% standard VAT rate must be applied to the sale of refined recycled gold. This decision removes the “grey area” that previously allowed some traders to claim VAT benefits, effectively tightening the net on the gold industry’s tax compliance.

Key Business Implications

• Permanent Disqualification: The “history” of the gold now dictates its tax treatment.

  Source: ConCourt Settles It: Recycled Gold Doesn't Get Zero-Rated