How much is the tax on Forex trading...in Canada

Hi,

I am new to this…I have been using a demo account and i like it, i’ll keep using it for 3 more weeks and then decide if i open an account.

My question is
Does the Canadian Revenue Agency tax the income generated from Forex trading? If so (which i think they do) how much is the tax?

Any help is appreaciated and kudos for the great website, i love it!

iyados

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what i heard before is that there is no tax on games an lottery and forex profit is dealth with as a lottery gain ,i’m not quite sure yet ,this is not the case in usa where it’s taxable ,but don’t take my answer as cash:) ,btw i’m canadian living in usa

Is that the rule just for canada? Wow…I should move to Canada!!! Here in the USA …the IRS takes taxes out before you ever see the lottery winnings…:rolleyes:

How many percent does the IRS take from trading profit in the US?

Thanks.

so no one knows really about taxes in Canada?

You could just call the toll free number to CRA and ask. However to my knowledge forex will be taxed as a capital gain which means 50% of your profits are taxed and the other is tax free.

This seems to be a very touchy subject with regards to taxes,and unless you live in the US, i doubt you will get a straight answer. I live in the UK and have no idea how they tax forex traders over here (if someone could enlighten me, that would be much appreciated)

James

well, officially? yes :slight_smile:
forex is not treated as lottery (unfortunately)

You have to pay taxes on all the income that you make on currency exchange… it is still a “grey area” and there is not specific “line number” to enter your income but “officially” you should post your forex income under “other income” field when you do your income tax return.

If you go to a certified accountant he/she may also enter this income as a capital gain, either way, you get taxed based on performace… anywhere from 23% to 50%.

I hope this helps.

Thank you for sharing useful information, we want you to come up with more information so that will be helpful to everyone.Even most of them gained some knowledge from this site.

Its is taxed as a capital gain.

Its pretty simple, just print out your account summary and take it to an accountant.

Canada:

Currently 50.00% of realized capital gains are taxed in Canada at an individual’s tax rate. (ie $100 CG with 43% tax rate will attract $21.50 of tax.) Some exceptions apply, such as selling one’s primary residence which may be exempt from taxation.[2]

For example, if your capital gains (profit) is $100, you’re only taxed on $50 at your marginal tax rate. That is, if you were in the top tax bracket you’d be taxed at approx 43%. Formula for this example using the top tax bracket would be as follows:

(Capital gain x 50.00%) x marginal tax rate = capital gain tax

= ($100 x 50.00%) x 43%

= $50 x 43%

= $21.50

In this example your capital gains tax on $100 is $21.50, leaving you with $78.50.

The formula is the same for capital losses and these can be carried forward indefinitely to offset future years’ capital gains; capital losses not used in the current year can also be carried back to the previous three tax years to offset capital gains tax paid in those years.

Unrealized capital gains are not taxed.

Source: Capital gains tax - Wikipedia

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cra-arc.gc.ca/E/pub/tp/it95r/it95r-e.html

“12. Subsection 39(2) applies to any fluctuation after 1971 of a foreign currency relative to Canadian dollars that results in a gain being made or a loss being sustained. In the case of individuals the rules in that subsection provide that only the amount in excess of $200 of an individual’s net gain or loss on the disposition of foreign currency is taxable or deductible as a capital gain or loss.”

When it comes to the Canadian Revenue Agency, always go to the source. Wikipedia is a good source for certain information but not as reliable.

QUOTE=teaDrinker;100170]Canada:

Currently 50.00% of realized capital gains are taxed in Canada at an individual’s tax rate. (ie $100 CG with 43% tax rate will attract $21.50 of tax.) Some exceptions apply, such as selling one’s primary residence which may be exempt from taxation.[2]

For example, if your capital gains (profit) is $100, you’re only taxed on $50 at your marginal tax rate. That is, if you were in the top tax bracket you’d be taxed at approx 43%. Formula for this example using the top tax bracket would be as follows:

(Capital gain x 50.00%) x marginal tax rate = capital gain tax

= ($100 x 50.00%) x 43%

= $50 x 43%

= $21.50

In this example your capital gains tax on $100 is $21.50, leaving you with $78.50.

The formula is the same for capital losses and these can be carried forward indefinitely to offset future years’ capital gains; capital losses not used in the current year can also be carried back to the previous three tax years to offset capital gains tax paid in those years.

Unrealized capital gains are not taxed.

Source: Capital gains tax - Wikipedia

I have another question regarding to Canadian income tax.
Does anyone know which amount of your forex account statement is reported to income tax? Is that the amount you have withdrawn in the year or the amount that appears in the statement on Dec 31 (for personal income tax)? I would appreciate if someone can help.

I talk to my tax guy about this, you do not claim the amount u have withdrawn from your forex account to bank, but u have to report every trade transaction you did for that year, so save all your forex statements.

Capital gains is not the only option for traders, you can also claim it as a business and be able write off everything, but the problem with that, it is 100% taxable. I believe its all depend on how much you make and how much you will write off. So both type of taxing is beneficial.

If you claim it as a business, you must first register the business, but that is an option. I would think it would be a bit more complicated this way.

Secondly, the only income you have pay tax on is what you have withdrawn above your initial investment. If your account is growing and you have not withdrawn anything, that is an unrealised capitol gain, it only becomes taxable once you with draw it.

Thirdly, if you are losing money or have lost money in FX in the past, that is a capitol loss and can be carried forward indefinately to offset any capitol gains you may have in the future whether from FX or any other type of capitol gain… so yes definately save your account statements.

Thats what i thought at first too, but i was told it went by trade, the moment u close a profited trade, then it has to be claimed, although the money isnt in your bank account it still is a profit, and you have to report, Ill have to double check that, but if its like you said , then that would be a lot better.

I think hastyle is right. The capital gain is only “unrealized” as long as it is being traded. If you have closed the trades and the funds are just sitting in your trading account this is a realized gain.

Of course, I came into this thread knowing nothing at all about the tax laws (why I’m here) but from what I have read, and understand of Canadian taxes what hastyle said makes the most sense. Perhaps as soon as he confirms it he can let us know for sure?

Well this is my first year of trading, so i’m not too concerned about it til next year. Something else i wanted to talk about, what qualifies a citizen to be able to claim their income as capital gains. For most people capital gains is a second income from their regular job, so their first income is taxed 100%, and their capital gains is only tax up to 50%. But what if trading has become your primary income, shouldn’t it be taxed at 100%??

My understanding is that Revenue Canada determines how gains such as forex and gambling are taxed depending on if they are your primary source of income. So full time traders’ gains are taxed not as capital gains, but income. I believe the interpretation is based on the amount of time and effort spent and not on the amount earned. So a part timer might earn more trading than his regular job and be taxed at capital gains rates if he can satisfy Revenue Canada that trading is not his primary occupation. Hope that makes sense.

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