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How is forex trading taxed in your country?

  • #41
  • Jun 10, 2008 5:33pm Jun 10, 2008 5:33pm
Quoting ycomp
wow, that's rough... I guess the moral is... never have a losing position.. EVER

you sure that's a good idea to use an offshore company while living in Australia? I heard that the Australian tax authorities are pretty much as vigilant as they come.
As I wrote that I just moved here last year, I am still Hungarian citizen. I am about to establish another company here and transfer a part of my capital into that and pay taxes here, as well to live up to this goverments expectations.
Lead me, follow me or get out of my way!
  • #42
  • Jun 10, 2008 5:35pm Jun 10, 2008 5:35pm
One has to wonder how these smaller countries (Slovenia, Hungary, etc) with high FX tax rates are even able to verify what their residents report, especially if said residents are using foreign brokers. I'm not advocating tax underreporting, just wondering how these gov'ts have the ability to track down and/or verify that everything is being reported as it should..
  • #43
  • Jun 10, 2008 5:36pm Jun 10, 2008 5:36pm
Quoting Evil Jerrad
As I wrote that I just moved here last year, I am still Hungarian citizen. I am about to establish another company here and transfer a part of my capital into that and pay taxes here, as well to live up to this goverments expectations.
ah, ok... how do you like living in Australia?
  • #44
  • Edited 6:24pm Jun 10, 2008 5:43pm | Edited 6:24pm
Quoting Trader KGB
One has to wonder how these smaller countries (Slovenia, Hungary, etc) with high FX tax rates are even able to verify what their residents report, especially if said residents are using foreign brokers. I'm not advocating tax underreporting, just wondering how these gov'ts have the ability to track down and/or verify that everything is being reported as it should..
well if someone stays under the radar and don't make too much money, they'll probably be fine The problem always is when they make some really good money
  • #45
  • Jun 10, 2008 6:50pm Jun 10, 2008 6:50pm
US tax code is very unfair to forex traders who operate small amounts.
Let me explain:
Unless you operate as an LLC (i.e register as a private small business) you will have to reposrt as income EVERY profitable trade, no matter what your losses are. The losses are reported separately as tax deductions. If you don't trade at the government gives you a standard tax deduction of $5150 in 2007. If you want to report your losses you can't use the standard deduction.
So if you win, say, $4000 in a year and lose $6000, for a net loss of $2000 you will owe MORE tax than a person who did absolutely nothing!!!

In Russia, Forex income (as any other income) is taxed at flat 13% rate, and only NET PROFIT is taxed.
"Luxury is one of the basic needs", (c), Don Corleone
  • #46
  • Jun 10, 2008 8:16pm Jun 10, 2008 8:16pm
Quoting Firstboss
US tax code is very unfair to forex traders who operate small amounts.
Let me explain:
Unless you operate as an LLC (i.e register as a private small business) you will have to reposrt as income EVERY profitable trade, no matter what your losses are. The losses are reported separately as tax deductions. If you don't trade at the government gives you a standard tax deduction of $5150 in 2007. If you want to report your losses you can't use the standard deduction.
So if you win, say, $4000 in a year and lose $6000, for a net loss of $2000 you will owe MORE tax than a person who did absolutely nothing!!!
This is completely untrue. Forex falls under IRC 1256, giving it the highly advantageous 60/40 blended rate (along with other benefits). This is irregardless of your account size.
  • #47
  • Jun 10, 2008 11:27pm Jun 10, 2008 11:27pm
Quote
This is completely untrue. Forex falls under IRC 1256, giving it the highly advantageous 60/40 blended rate (along with other benefits). This is irregardless of your account size.
Absolutely. Form 6781 divides 1256 contracts w/ a 60/40 split. Form 6781 takes all gains minus all losses, adjusted for carry over and 1099-R. This means the number carried from 6781 is the net, not the gross with seperate losses.

The resultant net gain is carried to line 13 of 1040 as "capital gains" income. Any additional sources of income are added in, minus out any tax credits and deductions, for your net AGI. This means you not only get to factor in losses, but also get any regular deductions and credits. Use the capital gains worksheet to figure out the rest, but generally your long term rate is taxed at 15% and your short term rate is taxed at your regular income tax bracket. Of course you may have to deal with the AMT, which is a different bag all-together.

Still the end result is pretty favorable, by the time you factor in deductions and credits you may end up reducing your effective tax bracket substantially. It's quite common to end up owing less than 20%. Which is, of course, the point. Give risk-takers additional tax incentive to take more risks, in turn creating business and jobs.
  • #48
  • Jun 10, 2008 11:47pm Jun 10, 2008 11:47pm
zero capital gains tax here in Singapore.
  • #49
  • Jun 11, 2008 12:13am Jun 11, 2008 12:13am
Quoting Peterinforex
zero capital gains tax here in Singapore.
Are you Singaporean? Is that applicable only to Singaporeans or to people outside Singapore as well?

I know that over the past few years, Singapore has been geared up to be a competitive tax heaven but this is some seriously interesting stuff.
Not all sins are created equal
  • #50
  • Jun 11, 2008 1:45am Jun 11, 2008 1:45am
In the UK, if done through a spread betting firm, there is no tax payable on forex gains. I don't know what happens if you trade through a broker that is not classified as a spread better...I presume you would pay capital gains tax rates (circa 18%, but with a £9200 tax free threshold). If you aren't interested in dividends, or wish to short shares, then there is no tax payable if done through a spread betting firm. UK residents can also place up to £7200 in a tax free share ISA which can then be used for buying and selling shares without having to pay capital gains tax...having said that ISAs have to be nominee accounts, so you are exposed to the risk of the holding institution going bust.

So, I do my currency trading, share shorting and short term buys through spread betting firms. Long term stock market and ETF stuff are held in my ISA and this leaves me a tax free allowance of £9200 for my gold capital gains. Unless you have stupid amounts of money, you can avoid most tax on investments. The UK really is a speculator's paradise...not sure it is a good thing for the society as a whole as it is a regressive tax benefit favouring the rich and "sophisticated"..however, when in Rome...
  • #51
  • Edited 6:17am Jun 11, 2008 4:51am | Edited 6:17am
No capital gains tax is applicable to both Singaporeans and to people outside Singapore as well.

Quoting Jay Walker
Are you Singaporean? Is that applicable only to Singaporeans or to people outside Singapore as well?

I know that over the past few years, Singapore has been geared up to be a competitive tax heaven but this is some seriously interesting stuff.
  • #52
  • Jun 11, 2008 11:18am Jun 11, 2008 11:18am
Quoting Peterinforex
No capital gains tax is applicable to both Singaporeans and to people outside Singapore as well.
Singapore, here I come! In a few years, at least, hehe.
  • #53
  • Jun 11, 2008 11:19am Jun 11, 2008 11:19am
Quoting Trader KGB
One has to wonder how these smaller countries (Slovenia, Hungary, etc) with high FX tax rates are even able to verify what their residents report, especially if said residents are using foreign brokers. I'm not advocating tax underreporting, just wondering how these gov'ts have the ability to track down and/or verify that everything is being reported as it should..
Hm, I thought the bigger the country, the less likely they can follow every individual.
  • #54
  • Jun 11, 2008 11:22am Jun 11, 2008 11:22am
Quoting priest9
Idear is: 4% gain on all capital (fictional gain, not actual), government want 30% of the profit. Making the effective taxation 1,2% of the total capital.

Personally I think that's pretty modest. Income tax although is huge, 52% for 50.652 - everthing beyond that point.

Also see http://en.wikipedia.org/wiki/Capital_gains_tax for other countries (about 30)

Thank you!!! The link is very helpful!
  • #55
  • Jun 11, 2008 11:26am Jun 11, 2008 11:26am
Quoting hendrix
Thank you!!! The link is very helpful!
yes just be careful that you need to know for each country if Forex profits are a capital gain AND (for people who make their livings from forex) if the government decides that it is a capital gain even for people who make their livings from forex, or if they treat it as regular income in that case. e.g. the link says no capital gains tax in Belgium but I doubt you can be a full time forex trader and living in Belgium and pay 0% tax.
  • #56
  • Jun 11, 2008 11:34am Jun 11, 2008 11:34am
Well I'm also from Slovenia and I was pissed when I found out about the proposed income tax from derivatives markets law.

The 40% is unreal, but as far as I know this government it will probably be passed with no regard to obvious issues - less capital in the country and difficulties with taxation of such trading.

But offshore is still the best way to go in any case. Cyprus (since it's in the EU & has the EUR currency) is very favorable for this, but also many other countries are OK also.

For us an option would probably be Croatia or Bosnia and Herzegovina. But for the moment there is no problem if one opens an individual account in Austria and evades taxation this way.

For companies still I believe in any case the best option would be offshore.
Greed and impatience are our greatest enemies.
  • #57
  • Jun 11, 2008 11:38am Jun 11, 2008 11:38am
Quoting Rabax
Well I'm also from Slovenia and I was pissed when I found out about the proposed income tax from derivatives markets law.

The 40% is unreal, but as far as I know this government it will probably be passed with no regard to obvious issues - less capital in the country and difficulties with taxation of such trading.

But offshore is still the best way to go in any case. Cyprus (since it's in the EU & has the EUR currency) is very favorable for this, but also many other countries are OK also.

For us an option would probably be Croatia or Bosnia and Herzegovina. But for the moment there is no problem if one opens an individual account in Austria and evades taxation this way.

For companies still I believe in any case the best option would be offshore.
does Slovenia have any anti-CFC (Controlled Foreign Company) or similar anti avoidance legislation? I mean is it ok to open an offshore company while living in Slovenia and make all the profits offshore even though management (you) still live in Slovenia? I'm curious cause Slovenia is a rather new country still, maybe they haven't written those laws yet.
  • #58
  • Jun 11, 2008 12:22pm Jun 11, 2008 12:22pm
Quoting Rabax
Well I'm also from Slovenia and I was pissed when I found out about the proposed income tax from derivatives markets law.

The 40% is unreal, but as far as I know this government it will probably be passed with no regard to obvious issues - less capital in the country and difficulties with taxation of such trading.

But offshore is still the best way to go in any case. Cyprus (since it's in the EU & has the EUR currency) is very favorable for this, but also many other countries are OK also.

For us an option would probably be Croatia or Bosnia and Herzegovina. But for the moment there is no problem if one opens an individual account in Austria and evades taxation this way.

For companies still I believe in any case the best option would be offshore.
Yes, as far as I know, this can be done up until 2012.
  • #59
  • Jun 11, 2008 12:23pm Jun 11, 2008 12:23pm
Quoting ycomp
does Slovenia have any anti-CFC (Controlled Foreign Company) or similar anti avoidance legislation? I mean is it ok to open an offshore company while living in Slovenia and make all the profits offshore even though management (you) still live in Slovenia? I'm curious cause Slovenia is a rather new country still, maybe they haven't written those laws yet.
No such things here, AFAIK.
  • #60
  • Jun 11, 2008 12:58pm Jun 11, 2008 12:58pm
Yes, tax on forex is much lower in Hungary than in Slovenia. It is only 36%.

Quoting hendrix
Anyhow, I've just found out I can MOVE to Hungary without any kind of limitations!!! It can be done in a week if I want to!!! That's good news! Huraaaaaay!
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