Hi everyone,
Well, it is coming up to tax time for many countries whose financial year will end 30 June. I am sure there are many people new to “Live” Trading who have not worked out the right way to go about their tax affairs. I have looked fairly hard and currently have not found much in my home state (Tasmania) as far as expert Forex taxation accountants.
I thought about asking the questions just for me, but why don’t we use this thread for everyones benefit. For example, I might find something very useful for Australian Tax laws. If I posted it here, it would then hopefully benefit anyone with similar issues in Australia. Why not do it for any country and anyone with questions might be able to find answers here.
I cant help you here as I dont even understand my own tax laws but got hit with a bill this year. however this is a great idea and hope others chime in. this is a great topic as we all have to pay sooner or later./ Helps to know what you are looking at before hand.
OK, First question from me then 
I am in profit on my trading, and as such, will need to declare it in my tax return.
The profit is not huge at the moment, I would expect just a couple of grand by end of June. It will hopefully be significantly higher by tax time next year. My issue is not that great now … but will be in a years time hopefully.
At what time should a person create a separate legal entity (company) to trade from, rather than use his/her personal income + forex gains
What are the considerations etc for the best tax minimalisation for traders. Obviously, nobody wants the Tax office chasing them down, so we all want to do it right, but only pay what we have to at the end of the day.
Any suggestions for any countries is welcomed, but more specific to Australia will definately be appreciated. I also have no issue having an accountant not based in Tasmania, it will just give me an excuse to travel interstate to get the taxation etc done.
Thanks everyone
Here is another Thread about Tax… Hope it will help some…
http://forums.babypips.com/forextown/117-how-do-taxes-work-forex-trading.html
Good Luck.
My Question is…
My trading account is held in UK. If I earn some profit, Where I will pay the tax? Will my broker collect my tax due every year? Or I pay to my home country (I am not from UK).
Thanks.
I don’t believe the broker takes any tax at all. That is all your responsibility. Maybe a relocation to Switzerland, Dubai or Monaco???
Seriously though, when you pay taxes, will it be on the profit you have pulled out of your account, or the profit level in your account.
For example, a person may start an fx account with $1000, and not want to touch anything (ie pull a wage) until it hits say $100k. Do you have to pay tax on the $99k that you made on the way there, or only on the money you pull out as the wage??
Thanks also for the other thread. I will have a look at it
If my broker do not withheld tax from my profit, I am FREE from any type of tax. LOL… I am working and living in Dubai. Here no Income Tax. But I am from India. There is Huge income tax in India. But being a non-resident Indian, I have no liability to pay tax. Ha ha ha.
If you resident of particular country more than 183-185 days and make money from same country you should pay tax. From your profit and interest earned. It’s applicable in India and USA. I don’t know about other nations.
If you make money from US market sitting in Australia then you have no responsibility to pay tax.
In my country, anybody reside more than 185 days in India, he should pay tax from any taxable income. There is no tax if someone hold security (company shares) more than one year.
Rather it’s more confusing if we consider Forex market.
In a nutshell I can say, If you made any income from Australia (I think you living in Australia) and bring money from abroad you should pay tax from every financial year. You set off your all expenses from your profit.
If your broker is outside from your country, then tax applicable when you bring your money to your country.
Good Luck
Australian tax law as I understand it, from several calls to the ATO:
If you keep good records, as you (and your broker) will then at the end of the year you can look at your position and have it assessed as positive (hopefully) or negative income.
If it is a ‘small amount’ or a ‘small number’ of trades then it may be considered a ‘profitable hobby’ and may not be subject to taxation. The small part is the kicker here - who defines small, and when.
As of last year the Tax Act was changed that anybody resident in Australia, regardless of number of days had to pay tax on income earned at the Australian rate of tax, less any that may have been paid in a PAYG (or other) for to another associated tax collecting country in the place of income. This was so they could tax the people earning large amounts of money working offshore and coming back to Australia less than 180 days a year. The only way to now avoid this is by moving, gaining residency in a foreign domicile and declaring to the ATO you are a non-resident for tax purposes and you can demonstrate that you are in Australia for only short periods of time and that your income is gained with you outside Australia.
Setting up a company once income exceeds the $80k-ish doesn’t help that much, as you will still pay income tax on what you take home. If you are making a large enough amount to make it matter (and you don’t need the money in Australia) then you could register a company in a lower taxed country, and keep the profits there in the companies account paying yourself a wage to work for said company. This for large incomes only, as the cost of compliance and setting up such an entity for a non-domiciled person in the lower taxed country can easily exceed $20k in setup and $10k in annual maintenance. Any monies you bring back into the country at any stage will be subject to tax at that point, and any use of the companies assets overseas (say it buys a house/car/boat) can still have you subject to fringe benefits tax.
As to the profits made on trades, each trade is seen as a transaction and like a business you need to pay tax on profitable transactions. Rather than waste yours and the ATO’s time filing a profit or loss tax declaration on each trade you just bundle them all and pay tax on profits over the course of the financial year at assessment time.
Costs to have an interstate accountant look at your books is a cost of doing business, so you might as well enjoy it!
Note: I am not a CPA, or registered tax or financial advisor. Use this advice at your own risk. Do not tumble dry.
Thanks for that Cyco. That was useful information. I might book in to the tax office next week sometime to get an idea from them and maybe even a list of people who handle this sort of accountancy.
salimvp - Lucky bugger residing in Dubai. Maybe if/when it really takes off, a Monaco Townhouse or owning a hotel room in Dubai may be the thing to do
Honestly though, If I have to pay tax, it means I have made money, so it isn’t about not having to pay. I am happy to pay as it feeds back in to the economy etc. I just want to pay only what I have to
I come from the philippines and there is not forex regulations or laws for taxation fo forex, basically I receive my earning (though its not big) and get it whole? Im a fresh graduate, and i do not know anything about taxes. what do i do?
jingoy, Whilst I have never done any research on Philippine tax law if it is an income they will want part of it in tax!