i wonder if there is a loop hole to only having 1 income (forex) and have it tax as capital gains.
I believe that the loophole exists until Revenue Canada catchs you. In other words, they trust us to legitimately declare our earnings (think waitersâ tips) and to learn the applicable portions of the tax code so we donât make mistakes. However if they find out we made a mistake or were deceptive, they will come down hard and you donât want that. The powers that Revenue Canada has at its disposal are awesome and a bit terrifying.
Ive heard mix things about the revenue canada, Iâve never been audit by them, but i have a friend who has gone through it ( didnât do his taxes for 3-4 years!), and he said they have a low interest payment system, its better to owe them then the banks.
That is somewhat different than my experience. My tax accountant made a mistake on documenting my deductions properly and Revenue Canada took their sweet time in informing me of the situation. By that time there was several months penalties and interest and interest on the penalties. My tax accountant handled the appeal, but again Revenue Canada took their own sweet time. I would get these âremindersâ and again the penalties were piling up and the interest was unbelievable. Meanwhile I was getting nervous about the appeal process because Revenue Canada holds all the power in these situations. Eventually it all got sorted out in my favour and I got my refund from Revenue Canada with interest.
Like i said Iâve heard good and bad things about them. Itâll be interesting to see when tax time comes, in the mean time i have been saving all my receipts.
I think I would rather just get it right the first time. Sure there are loopholes, but I donât think getting caught is worth the risk. And a good accountant can usually find legal ways to get the most out of your income anyway. Guess Iâll talk to a professional when tax time comes around again.
So has anyone figured out when their forex profits technically become ârealized profitsâ? If I donât take any money out of my forex account do I still need to pay capital gains at the end of the year?And if it is classified as a capital gain, what percentage of it is taxed, if forex trading is currently my only source of income ? (I am a student).
Has anyone ever gotten their forex account taxed as their primary source of income? that way they would only pay taxes on what they take out of their account account, rather then what is in their account.
Seems like a pretty confusing topic, but surely someone has went through this before 
I just finished working in the US this past May, and am back in Canada now, so next year I will have to do both US and Canadian tax returns.
- Do I have to claim any CGâs on both returns?
- What about subsequent years (2012 onward) when Iâm no longer making US income, will I always have to file a US return for CGâs made from forex?
Synergy
The advice you get here is free and whatâs its worth is nothing. You will have to get a tax accountant to prepare your filings and they will know the answer. From my past experience I believe the answer is yes, but that was more than 7 years ago and I may have confused things.
I was watching BNN the business channel in Canada and last month they made it quite clear that making money on exchanging currencies in Canada is âNotâ taxable and has never been taxable as of yet.
So, what gives? Does anyone have a clear answer here, as I have went to many tax accountants and most of them feel it is not taxable either but there really seams to be a gray area here.
Huh?
That doesnât make much sense as CRA (Canada Revenue Agency) wants their tax percentage on every dollar you make. They donât give breaks to money earners such as paying no tax on any money made on investments whether it is trading currencies or selling icecream. The only untaxed money is lottery winnings. IMHO
CRA website Foreign Exchange gains and losses
Iâve been reporting my FX gains as instructed here since 2007 and no problems with CRA since then. What I do is I summarize my monthly P/L and then do another further summarization for the yearly total.
If they ever wanted to see reports of individual transactions I would refer them to my broker because I donât feel like printing out 1000-2000 pages of transaction summaries and I bet they donât want to read it. I also make sure to include my account number so they could theoretically go to the broker directly themselves.
This is serious stuff, and sometimes it might be helpful to just not say anything if you donât actually know 
My point was - CRA doesnât recognize tax free revenue.
You do pay tax on your forex earnings right? Someone suggested that money made on the forex is tax exemptâŚI donât think so.
So, speaking about your own situation, could you tell me if you trade as an individual or a company? I want to start trading, but I would like to do it in the most tax friendly way. I have a ltd company that currently doesnât carry on any business (the purpose for the company setup never materialized as intended), so I could use this legal entity as the account holder if the tax situation is more favourable than a personal account. Do you claim your profits as straight revenue and pay income tax or use capital gains as the vehicle for dealing with CRA?
Not to seem nosey, but you seem to have the knowledge that so many of us are trying to learn. Thanks in advance for any info that you can share
From what Iâve read in all the links (which are available to you as well!) I would be described as an individual speculator, where my profits are not tied to any business operations.
It seems you either get âcapital treatmentâ (like me) and report as capital gains, or you get âincome treatmentâ and your profit/loss are reported in accordance with business income.
I have no experience with the âincome treatmentâ and any information I have is just from reading information provided at the link.
When I was referring to people that didnât know I wasnât talking about you used2b, but rather the people that said there were no taxes! I agree with you, there ainât no way in hell the government is going to let you earn money without them getting their chunk 
No offence taken ha,ha. I just wanted to state the obvious. I donât know how BNN could have put accross an idea of no tax on forex revenue.
Again, thanks for your input akeakamai. I like your style and am going to try the minimal report method with CRA. I will speak with them about the Limited Company approach and see if there is a better way to account for tax vs income.
So from your answer, all your forex dealings are capital gains with respect to CRA. If I used the business as the account holder, there would be a capital gains impact also but I donât know yet if it is better/worse than as an individual. If I used this method, I would give myself a bonus from the company and pay individual tax on that income.
Have to ask a tax accountant which is the better move for me.
Becoming Ltd only makes sense if you are earning large figures. A small business get a tax level of somewhere between 16 and 22% provided your below $400k. As the single shareholder, if you pay yourself out most or all of the profits, well then that is taxed as your personal income.
CRA is not going to let you earn a pile of money under the title of a corp and let the shareholder just use the moneyâŚlol⌠itâs not so easyâŚ
Capital gains are the ideal way to go for most FX traders. I was audited last year and CRA was very interested in my FX capital gains, but at the end of the day I had done everything correctly and backed it up with all account statements (which they did go through - 3 years worth, instead of the minimalist approach, I went with the overload approach).
I already have a LTD company, registered and paid for, so I thought that I could set up my trading account under that umbrella. Only reason is that it is already in place and maybe (I donât know yet) there would be a tax strategy that would work.
I know that I would pay personal income tax on any money transferred to me as a bonus/salary. If the capital gains percentages are the same for LTD Co. vs Personal, then there is little to be gained, but I was led to believe that capital gains for a LTD company has more benefits. If this were so, I would leave the capital gains benefits within the LTD Co and only take out bonus amounts as necessary at my personal tax rate.
I also have a sole proprietorship type company (not LTD) that I use for my other day to day revenue (communications contracting). I declare home office costs, etc. using the sole proprietorship and pay personal tax on the final figure. It may be just as beneficial to use personal capital gains for FX and stay with the sole proprietorship as my only revenue source. Just hate to waste the LTD.
hello Mr.klrman
i am facing this type of problem if u got the answer then please tell meâŚ
Clarkden
sr&ed toronto
Well I guess to each their own. If you actually make any money trading FX and want to chance not declaring it, all the power to you.
Having been audited, I would say that is not something I would want to do.
Cheers
AMEN to that!
In 2003 I was a shareholder in a venture capital company that had a âproblemâ and folded. This is off topic, sorry, but because I had shares and received options on those shares (which I took of course) I was taxed on the full value of those shares even though I never received any money (just share percentage increase), from them as the stock price tumbled. CRA still taxed me on the perceived value of the shares and I paid income tax as if I had received real money. This killed me personally and I am still recovering.
Moral of the story isâŚdonât mess with the CRA. They are always right, and its a hard fight to prove otherwise. Pay your taxes!