Is it ethical to use gold as currency overseas?

Details

Category: Global Perspectives

Published on Tuesday, 07 February 2012 14:12

Written by Brandon Rowe

A few weeks ago, we received the following question:

Would it be: A) Possible B) Legal and C) Ethical to physically move precious metals to a foreign country and use said metals to barter for real estate? ... Would the barter transaction be subject to Capital Gains in the US?

I'll address it here for the benefit of all our readers...

Is it possible?

In a word, yes. However, one has to keep in mind that a number of jurisdictions require some types of precious metals (PMs) to be declared before export. In the US, that entity is the Foreign Trade Division of the Census Bureau.

Depending on the value of the metals you intend to transport, a better option is to consider hiring a professional firm like Viamat to move them for you. Such firms know all the ins and outs of the process and are much less likely to have any hiccups along the ways. Transporting thousands of dollars worth of precious metals across borders can be difficult or potentially even a nightmare, as one American experienced last year when bringing gold coins from the US to Panama via Mexico.

If you'd like more information about transportation of precious metals, see our previous article, 3 Ways to Move Gold Overseas.

Is it legal?

Importing and exporting PMs is indeed still legal in most areas of the world including the United States. However, that doesn't mean it's always easy. Some jurisdictions have a number of regulations (and taxes, duties etc) to comply with before import is allowed.

That all said, the general rule is... yes, but just be sure to understand the entire process first and plan accordingly. This is not an activity you want to try without being fully informed first.

Is it ethical?

That's a tricky question as everyone has a different definition of ethical. For me, printing pictures of dead presidents (and an ambassador) on pieces of paper intrinsically worth nothing and calling it money is unethical. And yet, pretty much the entire world works on fiat currency.

On the other hand, using a medium of exchange that has underpinned the economies of countless nations for thousands of years seems perfectly natural to me.

You have to decide where your own line is.

Would the barter of gold be subject to capital gains tax?

It would be, yes. On the date of the transaction, the metals used for the barter process are considered sold for tax purposes and capital gains are due on the difference between what the metals were purchased for and what ultimately they were valued at on the day of the sale.

Summing up

That all said, if indeed the purpose is to simply purchase real estate, it would certainly be an easier idea to simply liquidate the metal holdings in the US and then wire the cash to a bank account overseas for the real estate transaction.

PLEASE NOTE: The information contained within this article is based on the best research we could find as of the date of publication. However, the world changes fast and information can become out of date relatively quickly. So, two points... First, before undertaking any action described in this material, please conduct your own due diligence and verify all facts. Second, if you happen to spot an out of date fact or figure (or even suspect something is out of date or false), simply get in touch with us and we'll look into it. International Man is a network made up of some very smart people - tax specialists, accountants, lawyers, analysts and many other talented individuals. As a group, we can create and maintain a very accurate and highly actionable resource for internationalization.