I’m a 21yrs old college student, I’ve been trading forex for a year now and I made a profit of arround 20k. I’m now thinking of doing it as a business full time. First, I’m a canadian, is it possible to form a company and the only business of the company is just trading currency? and I get a salary form the company and I pay tax? are there any disadvantages to doing that? or is it better to just doing it as self employed? Anybody here is a Canadian trader and how u report your income? Thanks for helping me start up my business.
Well first nightmare I had with Forex, even before I learned anything about margin or leverage, was that our stupid CDN gov’t would have some crazy tax law on FX trading. So I got down&dirty with the Revenue Canada website, and here’s what I found:
Same taxing system as any other capital gain! (which was a big bonus for me because I was already very used to those taxes). If you are not familiar, that’s taxation on HALF of your profit for the year, which is better than being taxed on all of it of course. And on the other side of the coin, there’s a deductable (against your profits) on HALF of your losses. There’s also carry-backs for losses (which I handily used this year actually). And as a tiny FX bonus, if you make less than $30 profit on the FX, you don’t have to pay taxes haha. That was so random it made me laugh 
As for trading as a business? Way out of my league. I don’t know if you’d be pinned with businesses taxes, capital gain taxes, both or neither (yeah right :rolleyes: ) But you sound like you’re doing pretty good on your own, why not just re-invest that profit and soon you’ll be making 6-figures, with a nice tax benefit. If you made 100K salary, you’d pay taxes on 100K earnings, if you made 100K capital gain, you’d pay taxes on 50K earnings… pretty cool eh???
Thanks for sharing this info. Can i ask where in the Revenue Canada website you found all this information?
As for trading as a business? Way out of my league. I don’t know if you’d be pinned with businesses taxes, capital gain taxes, both or neither (yeah right :rolleyes: ) But you sound like you’re doing pretty good on your own, why not just re-invest that profit and soon you’ll be making 6-figures, with a nice tax benefit. If you made 100K salary, you’d pay taxes on 100K earnings, if you made 100K capital gain, you’d pay taxes on 50K earnings… pretty cool eh???[/QUOTE]
This is correct, and what you want to do… especially when your not making millions a year in the forex. Actually you may never want to create a corporation for trading, because once you break the $300k net profit level you’ll be taxed at the highest personal tax rate (as opposed to 16% up to that level, in Alberta anyway). If you google canadian capital gains tax rates you should be able to find the benefits of being taxed that way. One thing you may want to consider is trading other peoples money (not a lot of it). Just enough so that you can say you have a business you run out of your personal home. This will enable you to write off a portion of your house expenses (mortgage interest, utilities, house insurance, and property taxes). It can also help you to write off a portion of your vehicle expenses and going out to eat. Sometimes you can claim travel. And actually you don’t necessarily have to trade other peoples money, you just have to prove that you tried to create a business, if it doesn’t make any money that is ok, you just have to show that you planned on making money within 7 years… when you don’t you can claim you failed and then go on to the next business.
Oh and go see an accountant, you have no idea how much it will save you in the long run. Just wait til after April 30, we’re all stupidly busy til then (I’m taking a 10min break from my 70hour week and I just had to answer, so no sarcastic comments please).
Yeah, sure. I’ll dig up the link on the weekend when I’ve got some time 
May I offer a few thoughts?
First off - I’m moving to Canada! 
Finish college. It is your foundation for a life of learning. (No offense to anyone out there that took a less traditional path.)
Simple is good. Sometimes it is more efficient to pay tax than to create tax avoidance mechanisms. See how your trading develops, then talk to the pros in Canadian rules as to what structure may work best. In my experience, complicated structures are expensive to maintain.
If you want to trade other people’s money, go to work for a brokerage.
Just my opinion. Best of luck…
Haha right on! I don’t hear too many people moving TO Canada, from the US anyway. Where are you moving to?
I’m going to University too (college=university in the US???) and I fully intend on finishing that, and probably taking it to the PhD level. But I definitely caught the trading bug, but don’t really want to be a full-time trader, so I guess I’m kind of conflicted. I’m looking for something that I could do AFTER I’ve made lots of money on a salary. Perhaps FX could be my means of retiring early. Or it could just be a “hobby” if that’s at all applicable. Either way, I’m having fun learning about it, so if I don’t use it later in life…oh well, learning is good for you
wait a minute, guys!!! You are saying that in Canada, the taxation is 50 % from your yearly profit. Is it true???
I am going to move to Canada too soon, so I am interested to know. Please, find time to answer me
No, it’s only on capital gains. When you make a “fixed” salary it’s fully taxed.
[B]Here’s where it says FX is counted as capital gains: [/B]
[I]"Foreign exchange gains or losses from capital transactions in foreign currencies are considered to be capital gains or losses. However, you only have to report the amount of your net gain or loss for the year that is more than $200. If the net amount is $200 or less:
there is no capital gain or loss; and
you do not have to report it on your return."[/I]
[B]And here’s the capital gains info:[/B]
[I]"Because the capital gains inclusion rate in 2006 is 1/2, only 50% of the capital gain from a disposition of property is taxable. Your cumulative capital gains deduction from 1985 to 2006 for all types of capital properties is
1/2 of the above $500,000 exemption, or $250,000.
You can claim any amount you want to in a year, up to the maximum."[/I]
Well I guess you can make $200 before you start getting taxed haha. And it looks like if you get more than $500 000 in capital gains in your lifetime, you have to start paying full taxes… but seriously, if you made $500 000 in FX, I don’t think you’d be complaining about anything