FIFO Principle in Precious Metal Sales

The FIFO principle (First In, First Out) is a cost-flow convention widely used to allocate the acquisition cost of physical precious metals when only part of a holding is sold. Anyone who, for example, buys gold in several tranches at different times and prices and later sells a portion assumes for cost-basis purposes that the units bought first were also sold first - regardless of which coins or bars physically change hands.

How Malta treats gains on precious metals

Malta is a jurisdiction that levies no capital gains tax on the private disposal of movable assets such as bullion coins and bars. Maltese capital gains tax (under the Income Tax Act) applies only to specific categories of assets - notably immovable property, securities, business goodwill and certain intellectual property. Physical gold, silver, platinum and palladium held privately do not fall within these categories, so a private individual who sells bullion at a profit in Malta is generally not subject to capital gains tax on that gain. There is no German-style speculation period and no annual gain threshold to observe.

Even so, the FIFO convention remains useful for private record-keeping: it establishes an orderly, defensible basis for allocating acquisition costs across tranches, which matters for personal accounting and for anyone who might later relocate to a jurisdiction that does tax such disposals.

Worked example

Purchase 1: 10 oz gold on 01/03/2023  at 1,800 EUR  = 18,000 EUR
Purchase 2: 10 oz gold on 01/09/2024  at 2,400 EUR  = 24,000 EUR
Sale:        5 oz gold on 15/04/2025  at 2,800 EUR  =  14,000 EUR

FIFO -> cost basis: 5 x 1,800 EUR = 9,000 EUR
Gain: 14,000 EUR - 9,000 EUR = 5,000 EUR

Under FIFO, the five ounces are allocated to the first purchase (March 2023). In Malta this private disposal of bullion is not subject to capital gains tax; the calculation above simply documents the economic gain for personal records.

Practical notes

• Documentation: every purchase should be documented with date, quantity, cost and dealer invoice, so the FIFO allocation can be evidenced if needed.
• Bulk custody: for bars or coins that are not individually numbered, FIFO is the natural, widely accepted default method for allocating cost.
• Mixed holdings: different types (gold ounces, silver bars, etc.) are assessed separately under FIFO - cross-category netting is not appropriate.
• Investment gold VAT-exempt: investment gold is exempt from VAT under Directive 2006/112/EC; the FIFO principle relates purely to cost allocation, not to VAT.

The historical precious metal prices can help reconstruct the original acquisition value if original receipts are missing. You can estimate the potential effect of a sale in advance with the tax estimator.

Note: This article serves as general information and does not constitute tax or investment advice. For an individual tax assessment, please consult a qualified tax advisor. Sources: cfr.gov.mt, legislation.mt, eur-lex.europa.eu.

In brief

The FIFO principle automatically allocates the oldest holdings first when precious metals are sold. In Malta, private disposals of bullion are not subject to capital gains tax at all - FIFO nonetheless provides a clean, orderly basis for personal cost accounting.