Diamond Trading in Germany:
Legal Requirements

Diamond Trading in Germany: Legal Requirements

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The light refracts colourfully in the cut, the stone sparkles set in a precious necklace or engagement ring. However, before a diamond can sparkle on as jewellery, it needs to change hands through purchase or sale.

But buying and selling a diamond is not a legally trivial transaction due to its often high value.  Legal issues are not uncommon with the purchase and sale of diamonds, from doubting the authenticity of the diamond to problems with the agreed purchase price or tax issues.

At Schlun & Elseven Rechtsanwälte, our lawyers advise on all matters concerning investing in diamonds in Germany. We support private individuals as well as jewellers and diamond traders on legal matters concerning the purchase/sale/inheritance of the gemstone or other issues relating to investing in diamonds.

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Buying Diamonds in Germany

Is it Possible to Buy a Diamond Anonymously in Germany?

Diamonds are seen as a piece of jewellery as well as an investment. Should a person wish to purchase a diamond anonymously as an investment, the purchaser must consider the applicable legal situation. An anonymous purchase is not possible in all cases.

Even if there is no official obligation to declare the purchase, sale or possession of a diamond, there are limits to the anonymity of the purchase. As soon as the purchase amount exceeds €1,999.99, the seller is obliged to record the buyer’s personal details according to the Money Laundering Act (GwG).

If a person buys a diamond with a value of €2,000.00 or more and pays for it in cash, the buyer must be able to identify himself.

Buying a Fake Diamond in Germany

A person may buy a diamond and later realises that the diamond purchased is a fake. If you find yourself in this situation, it presents you with the question of how best to deal with this situation legally. Our team of lawyers can assist you with this question and advise you on this concern. The following information will help you get an initial overview.

As soon as you are confident that the diamond is not real, it is advisable to first contact the seller and inform them about the fake diamond. In the course of this contact, the buyer should try to return the alleged diamond for a refund of the purchase price. If the original seller agrees to the return, the buyer must receive the purchase price back in exchange for the object of purchase.

It is also possible to demand a genuine diamond from the seller (redelivery) because the buyer can demand the delivery of the original product from the seller. However, this may not be possible from the seller’s side.

The buyer can also claim damages. However, the buyer can report the seller if the seller does not respond to the buyer’s request or does not agree or comply with any of the above options. In any of these cases, you should contact a lawyer beforehand. Our practice group will happily assist you and give you specialised advice.

To avoid buying a fake diamond, we advise you to pay attention to the enclosed certificate of authenticity when purchasing. Read it carefully and ask the certificate’s seller or issuer questions if necessary. You should never buy a diamond without the corresponding certificate and ensure that a recognised institute has issued it. Keep the certificate and the proof of purchase in a safe place to avoid difficulties later on.

Usury when Purchasing a Diamond in Germany

In the international arena, the purchase price of a diamond varies little. The price to be paid usually differs due to the applicable tax rates in the country of purchase. However, when buying a diamond, the purchase price can still be far above the actual value. If a purchaser pays an excessive price, this may be considered usury under German law.

According to the German Civil Code (Bürgerliches Gesetzbuch, BGB), a legal transaction is invalid if it is contrary to morality (cf. § 138(1) BGB). § 138(2) BGB of the said norm explains when a legal transaction is considered void due to usury. The central requirement is the existence of a striking disproportion between the performance and the consideration. Furthermore, usury is a criminal offence according to § 291 StGB.

Therefore, if you find yourself in a situation of an excessive price and possibly usury when buying a diamond and want to report this to the police, don’t hesitate to get in touch with us. Together with our lawyers, we will advise you in detail beforehand, check your chances of success and explain your further legal options.

Selling Diamonds in Germany

If you want to sell a recently acquired diamond at a profit, there may be questions regarding the price and tax law implications of that sale. In the following, we will clarify these and other questions for you.

Tax Liability from the Sale of Diamonds

Income from private sales transactions in the sense of § 23 Income Tax Act (EStG) is taxable according to § 22 (2) Income Tax Act (EStG). However, according to the latter standard, an exception is made for other assets, such as diamonds. For this purpose, the following conditions must be met:

  • More than one year has passed between the acquisition of the diamond and its sale.
  • The sale to the third party is not of a commercial nature.

If these aspects are met, the sale and the profit made from the sale are tax-free.

Non-Payment of the Purchase Price – Investing in Diamonds in Germany

The obligations associated with the purchase of an object are set out in § 433 BGB. The seller is obliged to hand over the item and transfer ownership, just as the buyer must pay the purchase price of the item and accept it. But how should parties deal with a failure to pay the purchase price?

In addition to the possibility of withdrawing from the purchase contract and, if necessary, asserting a claim for damages, you could request the debtor to pay the purchase price and, in the event of a refusal, initiate dunning proceedings (default procedure). We will explain how to initiate such proceedings and the consequences in the following.

The Dunning Procedure in Germany

If the seller has not received the purchase price of the object within the agreed payment period, it is possible to claim the sum utilizing a dunning procedure (default procedure).

The creditor can first demand the overdue amount out of court. Claiming this unpaid amount requires a reminder to be sent to the debtor. In the course of this process, the debtor is again requested to pay the outstanding purchase price. In this way, you can demand interest on arrears from the buyer (or debtor) in addition to the outstanding amount (cf. § 288 (1) BGB).

The reminder is not bound to any particular form, which means that it can also be issued verbally. However, we advise you always to submit the reminder in writing and include all relevant information for proof. You should indicate the amount due, the invoice number and the original payment deadline.

If the debtor does not pay despite the out-of-court demand for payment of the purchase price, you, as the creditor, can take regular legal action or file an application for an order for payment (cf. §§ 688 ff. ZPO).

If you choose the latter, submit the appropriate application form to the competent court, which will check it for completeness. The court will issue an order for payment if the application has been correctly completed. This court order is addressed to the debtor and is then served on them.

The recipient of the order for payment can then pay the amount demanded or lodge an objection (cf. § 692 no. 4 ZPO). The dunning procedure is concluded if the debtor implements the latter. Civil proceedings will clarify this dispute if the creditor sticks to his claim and wants to enforce their claim for payment. The lawyers of Schlun & Elseven will be happy to support you in implementing your claims and advise you on any concerns.

The creditor can apply for an enforcement order if the debtor does not pay within two weeks and no objection has been lodged. The debtor can again object within two weeks. This complaint would also lead to the initiation of civil proceedings. This step, however, is automatic. If the debtor does not use this right, the competent court issues the “enforcement order”. This enforcement order is an enforceable title that forms the basis for compulsory enforcement (cf. § 794 (1) no. 4 ZPO).

It is also possible to conduct such an order for payment procedure in cross-border disputes. If the creditor and the debtor are domiciled in different countries within the EU, the parties can initiate a European order for payment procedure.

The lawyers of Schlun & Elseven will be pleased to assist you in giving your legal claims the necessary support and legal certainty. Our practice group is at your disposal with all its experience and expertise, advising you on any legal matters and explaining your legal options. Use our online form and contact us today.

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Practice Group: Our Diamond Experts

Practice Group:
Our Diamond Experts

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Dr. Tim Schlun

Lawyer | Managing Partner

Aykut Elseven

Lawyer | Managing Partner

Dr. Thomas Bichat

Lawyer | Salary Partner

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