A used gold purchase is a steady source of stock and margin for a gold shop in Saudi Arabia, but only when it runs on clear rules. Left to whoever is at the counter, it turns into weight disputes, inconsistent prices and gaps in the records.
Sound management rests on four things: a price from the daily rate for the karat with a published deduction, a voucher recording the seller and the item, the correct VAT treatment for non-registered sellers, and moving scrap gold into stock by weight and karat.
This guide covers each step for the owner and the accountant, with a worked example of buying 20 grams of 21K gold.
Why a Gold Shop Needs a Clear Used Gold Buying Policy
A written gold buyback policy means every employee quotes the same price in the same way, with no room for errors in price, weight or records.
When you buy, you are valuing a piece with an unknown history that may contain solder, stones or a lower karat than stamped. The policy therefore needs to define:
- The source of the daily reference price and when it is updated during the day.
- The deduction per gram, by karat and by the condition of the piece.
- How karat and weight are tested, and who approves the result.
- The details and documents required from the seller before payment.
- Approved payment methods and the approval limits for each employee.
These rules protect the margin when prices move and show the customer the price is not a personal call.
Pricing Used Gold Purchases from the Daily Rate
The buying price for used gold starts from the daily price per gram for the same karat, minus a deduction that covers melting loss, cleaning and the shop margin. Workmanship plays no part in it.
Price Per Gram for 18K, 21K and 24K
Karat expresses the share of pure gold in 24 parts. The price of any karat is derived from the 24K price: karat price = 24K price × (karat ÷ 24). You can run this calculation quickly with the Daysum gold calculator and karat converter.
| Karat | Purity | Price per Gram if 24K = SAR 450 (Illustrative) |
|---|---|---|
| 24K | About 99.9% | SAR 450.00 |
| 22K | 91.7% | SAR 412.50 |
| 21K | 87.5% | SAR 393.75 |
| 18K | 75.0% | SAR 337.50 |
These figures are illustrative. The real scrap gold price per gram changes during the day, so the shop needs one approved price source.
Scrap and Cleaning Deductions and the Shop Margin
The shop deducts a fixed amount or a percentage per gram from the reference price, covering melting and refining loss, cleaning or testing, and the shop’s margin for risk and tied-up cash.
The deduction should be written into the policy and can vary by condition: scrap that must be melted, or an intact piece that can be resold after polishing.
Why Workmanship is Not Paid Back
The workmanship the customer paid when buying the piece was a charge for crafting that has been consumed. The shop cannot recover it when the piece is melted, so used gold is priced on weight and karat only.
Even for an intact piece the shop plans to resell without melting, the buying price stays weight-based; any difference shows up later in the selling price.
Worked Example: Buying 20 Grams of 21K Gold from a Customer
Assume a customer brings a broken 21K bracelet weighing 20 grams with no stones. The shop’s approved 24K price at the time of purchase is SAR 450 per gram, and its policy deducts SAR 10 per gram for scrap.
| Item | Calculation | Amount |
|---|---|---|
| 21K reference price | 450 × 21 ÷ 24 | SAR 393.75 per gram |
| Scrap deduction and shop margin | SAR 10 per gram | SAR 383.75 per gram |
| Total paid to the customer | 383.75 × 20 grams | SAR 7,675.00 |
| VAT on the purchase | Seller is a non-registered individual | None |
| Cost of scrap in stock | 7,675 ÷ 20 | SAR 383.75 per gram |
If the shop later sells this scrap to a refiner at SAR 389.75 per gram before VAT, its gross profit is SAR 120 before expenses. If it remakes the gold into jewellery, the gold cost is SAR 383.75 per gram plus crafting.
Also read: Gold price updates and how to manage them through software, on applying one approved daily price across all branches.
Documenting a Used Gold Purchase
Every purchase should end with a numbered purchase voucher that records the seller, the item, the price and the payment method. The voucher is your evidence for any inspection and the basis of the accounting entry.
Seller Details and ID
Ask for a valid ID (national ID or iqama) and record the seller’s name, ID number and mobile number. It is good practice to have the seller sign a declaration that the piece belongs to them and that they are entitled to sell it.
Trade in precious metals in Saudi Arabia is supervised by the Ministry of Commerce. Make documentation a rule for every deal regardless of the amount, and check with the Ministry for the detailed requirements that apply to your activity, including anti-money-laundering obligations.
Weight, Karat and Photos on the Voucher
The purchase voucher should include:
- A description of the piece (bracelet, ring, chain) and its condition.
- Gross weight, and net weight after removing stones or any non-gold parts.
- The karat stamped on the piece, and the tested karat if it differs.
- The reference price used, the deduction per gram and the total amount.
- A photo of the piece before melting, the date and time, and the employee’s name.
- The payment method; a bank transfer is preferable because it leaves a clear trail.
The photo and the signed weight settle any later dispute.
Tax Treatment of Used Gold Purchases
When a shop buys used gold from an individual who is not registered for VAT, no VAT is charged on the purchase, because the seller is not making a taxable supply. As a result, there is no input tax for the shop to recover on that purchase.
If the shop buys scrap from a VAT-registered business that sells it as part of its activity, the seller issues a tax invoice and the shop can deduct the input tax under the normal conditions.
Some shop owners ask about the profit margin method in Article 48 of the VAT Implementing Regulations. It applies only to used goods that ZATCA specifies by decision, and it requires prior approval. The decision published in the Umm Al-Qura gazette applied it to eligible used cars from 1 July 2023, and we found no published decision covering gold at the time of writing. Do not assume the margin method is available to your shop without confirming with ZATCA.
A later sale of the gold follows the normal VAT rules. For trade-ins of old gold against a new piece, see our guide to gold-for-gold exchange and how to calculate the difference and VAT.
Moving Scrap Gold Into Stock: Remelting or Resale
After the purchase, the gold goes into a separate scrap gold inventory account by weight, karat and cost per gram, apart from finished jewellery stock.
The entry for the example: debit Scrap Gold Inventory SAR 7,675, credit Cash or Bank SAR 7,675, with no VAT line.
From there, the shop has two paths:
- Remelting: the scrap is sent to the workshop or factory, the actual melting loss is recorded, and the new pieces enter stock at the gold cost plus the cost of crafting.
- Sale to a refiner or wholesaler: the scrap leaves stock at its cost, revenue is recorded, and the difference is the profit or loss.
In both cases, the weight purchased minus documented loss should equal the weight sent to the workshop or the buyer.
How Daysum Links the Buying Price to the Daily Rate and Records Every Deal
Daysum’s gold and jewellery ERP is built on Odoo and manages stock by weight and karat with a daily gold price, so the purchase voucher uses the same price as selling.
In practice, a shop using Daysum can:
- Approve the daily price for each karat and apply it to both selling and buying.
- Issue a numbered purchase voucher that stores the seller’s details, weight, karat, price and deduction.
- Move scrap into a separate stock location by weight and karat, with an automatic journal entry.
- Track the scrap until it is remelted or sold, and issue sales e-invoices that comply with Phase 2 of Fatoora.
If your shop buys used gold every day, talk to the Daysum team to see how the purchase voucher works with your data.
Conclusion: Used Gold Purchases with a Clear Margin and a Compliant Record
Buying used gold is profitable when the price comes from the daily rate for the karat with a published deduction and no workmanship, and safe when every deal is recorded on a voucher with the seller’s ID, weight, karat and a photo.
There is no VAT on a purchase from a non-registered individual, and the margin method should not be assumed for gold. The scrap then sits in its own stock account at cost until it is remelted or sold.
If you want buying and selling prices to come from one source and every deal to be posted automatically, contact the Daysum team to discuss how your shop works.
FAQs About Used Gold Purchases in Gold Shops
The shop starts from the daily price per gram for 24K and converts it to the karat of the piece by multiplying by the karat and dividing by 24. It then subtracts a per-gram deduction for melting loss, cleaning and margin, and multiplies the result by the net weight. Workmanship is not included in the calculation.
The shop needs the seller's valid ID, a mobile number and a signed declaration of ownership. It issues a numbered purchase voucher with the description, weight, karat, price, a photo of the piece and the payment method. Check with the Ministry of Commerce for the detailed requirements that currently apply.
If the seller is an individual who is not registered for VAT, no VAT is charged on the purchase and there is no input tax to recover. If the seller is a VAT-registered business selling as part of its activity, it issues a tax invoice and the shop can deduct the input tax under the normal conditions.
The margin method in Article 48 of the VAT Implementing Regulations applies only to goods ZATCA specifies by decision, and only after its approval. The published decision covers eligible used cars, and we found no decision covering gold at the time of writing. Confirm with ZATCA before using this method.
Scrap is recorded in a separate inventory account by weight, karat and the actual cost per gram the shop paid. When it is remelted, the actual loss is recorded and new pieces enter stock at gold cost plus crafting. When it is sold, it leaves stock at cost and the difference is the profit or loss.
