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How is forex trading taxed in your country?

  • #81
  • Jun 12, 2008 3:01am Jun 12, 2008 3:01am
Quoting SimonK
A spreadbetting firm allows you to take an FX position without actually buying/selling the underlying currency. The platform is exactly the same as any broker, but you dont own any currency when you enter into a trade, so you wont pay/receive interest either.
How are the underlying spreads at these firms? I'm sure they're probably not ECN-level, but are they comparable to Oanda?
  • #82
  • Jun 12, 2008 3:09am Jun 12, 2008 3:09am
Quoting Trader KGB
How are the underlying spreads at these firms? I'm sure they're probably not ECN-level, but are they comparable to Oanda?
Spreadbetting companies try the same tricks as any other broker, slippage during news spikes, requoting, etc. They are a dealing desk broker and you are trading against them. I'm using IG Index, The spreads are ok, I get 2 pips on aussie and euro, 3 on cable, but gbpjpy is 8 pips, so not great! But for me, the saving is tax which can eat up 40% of your profits.

What I do like about my broker is the spreads dont change, so I dont get stopped out when the broker suddenly widens the spread during a news event. I've seen OandA widen the spread to 30 pips before.
If it's too good to be true, it probably is.
  • #83
  • Jun 12, 2008 4:06am Jun 12, 2008 4:06am
Quote
A spreadbetting firm allows you to take an FX position without actually buying/selling the underlying currency. The platform is exactly the same as any broker, but you dont own any currency when you enter into a trade, so you wont pay/receive interest either.

Ahh, so it's basically just a legalized bucket shop.

Quote
The UK government puts spreadbetting in the same category as gambling, so there is no tax to pay. If we had to pay tax on gambling, the government would be out of pocket as we would be able to claim back our losses too

Here in the US you have to claim large gambling wins on your taxes, and I think there are limits to how much loss you can take. That's settled up yearly, so the IRS ends up ahead either way.
  • #84
  • Jun 12, 2008 9:42am Jun 12, 2008 9:42am
TragerKGB and Rabid, I really appreciate your comments! That is good news to me :-)
"Luxury is one of the basic needs", (c), Don Corleone
  • #85
  • Jun 12, 2008 11:18am Jun 12, 2008 11:18am
Quoting Firstboss
TragerKGB and Rabid, I really appreciate your comments! That is good news to me :-)
Yes, very nice responses, thanks to everyone!

@Firstboss: You live in UK?
  • #86
  • Jun 12, 2008 2:21pm Jun 12, 2008 2:21pm
No, Hendrix, I work in Connecticut, USA now. London is among my top three favorite cities, though (together with Moscow and New York)
"Luxury is one of the basic needs", (c), Don Corleone
  • #87
  • Jun 12, 2008 2:39pm Jun 12, 2008 2:39pm
Quoting Firstboss
No, Hendrix, I work in Connecticut, USA now. London is among my top three favorite cities, though (together with Moscow and New York)
I would say Moscow > London > New York for my tastes... although I haven't been to Russia yet, I'm sure it must be fun... London seemed like a nice enough place when I was there - but maybe I was just lucky with the weather... New York been there a couple times... that's enough for my lifetime lol
  • #88
  • Edited 5:12pm Jun 24, 2008 4:46pm | Edited 5:12pm
hi all

did anyone know anything about that topic about UK

thanks
  • #89
  • Jun 24, 2008 5:12pm Jun 24, 2008 5:12pm
hi all

did anyone know anything about that topic about UK
thanks
  • #90
  • Jun 24, 2008 5:15pm Jun 24, 2008 5:15pm
Quoting forex.man
hi all

did anyone know anything about that topic about UK
thanks
go to trade2win, they are uk site... so lots of info. But I think someone already posted that spreadbetting is tax free. Also you guys are really lucky, easy to move offshore for you and pay no taxes.
  • #91
  • Jun 27, 2008 5:28am Jun 27, 2008 5:28am
Poland has 19% from all profit gains through any investment, so if You have a 5% interest account, You pay 19% of that interest as tax, etc.

As for forex, when the broker is abroad You have to make calculations on the profit/loss, and lock it onto the for example USDPLN exchange rate fixing made by our national bank daily.

So if You got 4 years ago 1000$ worth 4000PLN, made another 1000$, pulled out 4000PLN, since 2000$ now is like 4000PLN (PLN appreciation) then You pay about 25%-30% tax (depending when You gained and when You lost) from this sum. So You put 4000PLN, taken 4000PLN, and have to pay 19% out of 2000PLN, that is like 500PLN as tax. Nice

It's quite scary actually trading with abroad brokers, since the tax offices in Poland have some scary laws, that if they assume You got more than You have said - then You will have to prove them wrong, not the other way around. And before You prove them wrong You have to pay the tax, only when You prove it wrong they have "6 months" to give You Your money back... So if You trade forex, and the tax officer has a bad day, then he might write somewhere that You made a million, and now it is up to You to prove them wrong. If not - pay pay pay...

Theoretically there are Polish brokers, that issue government taxing documents, and they are proof of earnings, but these brokers are one of the worst kind of bucket shops :/
-- just a simple trend follower
  • #92
  • Jun 27, 2008 11:50am Jun 27, 2008 11:50am
Quoting maniack
It's quite scary actually trading with abroad brokers, since the tax offices in Poland have some scary laws, that if they assume You got more than You have said - then You will have to prove them wrong, not the other way around. And before You prove them wrong You have to pay the tax, only when You prove it wrong they have "6 months" to give You Your money back... So if You trade forex, and the tax officer has a bad day, then he might write somewhere that You made a million, and now it is up to You to prove them wrong. If not - pay pay pay...
Wow that's rather Draconian, guilty until proven innocent!

What happens if they incorrectly claim that you owe drastically more, and you can't afford to pay it? Even if you're able to prove them wrong, will they send you to jail for not being able to pay the original incorrect amount? Crazy...
  • #93
  • Jun 27, 2008 12:44pm Jun 27, 2008 12:44pm
What you say is very true about the tax but you pay the spread every day when holding a position. The trade is closed every night and re-opened with the inherent cost.

It would be great without this limitation.

Anyone know of a spread broker that does not do this?

Quoting SimonK
Spreadbetting companies try the same tricks as any other broker, slippage during news spikes, requoting, etc. They are a dealing desk broker and you are trading against them. I'm using IG Index, The spreads are ok, I get 2 pips on aussie and euro, 3 on cable, but gbpjpy is 8 pips, so not great! But for me, the saving is tax which can eat up 40% of your profits.

What I do like about my broker is the spreads dont change, so I dont get stopped out when the broker suddenly widens the spread during a news event. I've seen OandA widen the spread to 30 pips before.
  • #94
  • Jun 27, 2008 4:56pm Jun 27, 2008 4:56pm
23% to be exact and one should trade as an LLC for best benefits.

Quoting Rabid
Didn't say no taxation at all. No federal income tax is what I meant. Here in the US we pay both state and federal income taxes, I actually ended up paying more to state than federal, so those guys get off pretty cheaply out there.

In the US forex is traded as a section 1256 contract, which is exempt from wash sale rules and given "mark-to-market treatment" of losses and gains... so any open positions are effectively taxed at the closing rate. These contracts are treated with a 60/40 capital gains split, meaning 60% long term and 40% short term. That equates to under 25% of the net for the year, which is lower than any income tax bracket by far.
"To Be A Successful Forex Trader, You Need A Successful Forex Mentor."
  • #95
  • Jun 27, 2008 6:50pm Jun 27, 2008 6:50pm
Quote
23% to be exact and one should trade as an LLC for best benefits.
Well, 23% assuming max tax bracket. Short term cap gains is taxed at your personal income tax bracket, so whatever that ends up being minus credits and deductions. If all goes as projected my 08 filing will be substantially below 23%.

What are the tax benefits of trading as an LLC versus keeping your trades personal? Both would be taxed as personal income, right? So what deductions can I take as an LLC that I can't as a solo DBA? Not considering liability issues, since liability isn't really an issue unless I manage funds.

How does that compare w/ S-corp or C-corp? I would think that would depend on how many assets can be held by the company, since you'd end up getting taxed multiple times (taxed on profits, taxed on payroll, taxed as an individual) it would only be worth it if there were externalities to consider. But I'm not an accountant, so I could be wrong there.
  • #96
  • Jun 28, 2008 6:17am Jun 28, 2008 6:17am
Quoting Trader KGB
Wow that's rather Draconian, guilty until proven innocent!

What happens if they incorrectly claim that you owe drastically more, and you can't afford to pay it? Even if you're able to prove them wrong, will they send you to jail for not being able to pay the original incorrect amount? Crazy...
no, you will have debt to the tax office. it will be deducted from any legitimate income until it will be paid. so this means anytime You would go to work the tax office will take all the possible money over the "starving wage", so You will have like 150$/mth from that work - until paid. this can go on for all your life if You make such an error and will not prove them wrong.

as far as the "jail" thing goes, then you will have "convicted tax felony" in your papers...

there is a proverb in Poland (from some old movie showing soviet era): "a obywatel niech udowodni że nie jest wielbłądem" - "and the citizen has to prove he is not a camel".

so to be honest I am wondering what will happen the next year, since up to date I traded only stocks and futures, and had it "legal in Poland, with all the documents for the tax office made by the polish broker" when I file in the annual tax declaration it would be really better for me to have a positive amount of tax to be paid from forex, or I'll get checked (it's not a problem usually as long a citizen has to pay the tax, but if he will have a loss, and will be able to deduct any tax...).
-- just a simple trend follower
  • #97
  • Jun 29, 2008 9:00am Jun 29, 2008 9:00am
Quoting jagui
Here in Italy there are no taxes for forex gains. Forex gains are taxed only if the equivalent of euro 50.000 is in a position for more than 5 days. But spot forex positions are closed and re-opened each day, so... no taxes

It's sure: online banks here say this on their website to attract forex traders.
So if an Italian Forex Trader has no other income except Forex, does he even have to file a tax return?
  • #98
  • Sep 12, 2008 4:17pm Sep 12, 2008 4:17pm
Quoting ycomp
So if an Italian Forex Trader has no other income except Forex, does he even have to file a tax return?
Not sure about this.
I think one doesn't have to file a tax return with only forex income, but even if you have to do it's not a big minus for paying no taxes.

Also the girls are amongs the world's prettiest.
What is amazing about italian girls, compared to other countries, is that almost 8 out of 10 girls here are hot! This is a rate I've yet to see elsewere!
  • #99
  • Sep 13, 2008 6:52am Sep 13, 2008 6:52am
yeah... how many countries have you lived in to come up with this conclusion? trust me, it's not like that at all.

Quoting jagui
Not sure about this.
I think one doesn't have to file a tax return with only forex income, but even if you have to do it's not a big minus for paying no taxes.

Also the girls are amongs the world's prettiest.
What is amazing about italian girls, compared to other countries, is that almost 8 out of 10 girls here are hot! This is a rate I've yet to see elsewere!
Nihil Sine Deo.
  • #100
  • Sep 13, 2008 7:26am Sep 13, 2008 7:26am
Quoting Scrat
yeah... how many countries have you lived in to come up with this conclusion? trust me, it's not like that at all.
Of course this is entirely subjective.
For me this is true comparing to usa, france, holland, uk, germany, all countries I spent much time in.
Among the countries I can say to have spent much time in, only greece and spain compare to Italy about hot girl incidence rate
I can't say nothing about other countries.

The single most beautiful girl I've seen was a dutch girl.

Peace and Love !!
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