Taxes on FX gains

not sure if this is the right place to post such a question, but if anyone have or had the experience of reporting taxes on fx trading gains, could you please share your experience? how do you report the gain?

thanks!

My background is as a tax lawyer. I am not sure which jurisdiction you are in but you would need to determine whether your activity is capital or income unless everything is taxed where you are. In addition you would need to check whether your activity is subject to a punitive regime as distinct to the regular codes.

so 2 things:

1 Is it taxed regularly and if so, is what you are doing capital or income:

2 Make sure it is not punitively taxed.

hi traider,

sorry for the late response. i appreciate your reply. but could u pls clarify the following?

if i understands it correctly, punitive regime would be one that taxes you on an annual basis? I reside in Ontario Canada. In addition, I buy and sell fx positions on a levered basis, i would say that it is capital based, as it is purely speculation and not related to any business operations. would this be correct?

thanks alot.

No.

Generally income in the OECD rules is characterised by frequency of event. So for example, if you are trading 5 times a day irrespective of how you finance that operation, that would be deemed to be income. On the other hand, if you held a position for say, 6 months before cashing it in, that is most likely capital enhancement.

The frequency of any operation determines whether you are running a business or simply growing your capital.

Punitive regimes go beyond simply imposing taxes on income. They punish certain sorts of income. So for example, if your trading is based in another tax jurisdiction which is getting first bite at the tax cake, your home jurisdiction may impose a higher rate at home to encourage you to move that operation home. In your case, if your broker is home based, you should be ok.

In conclusion, I would strongly advise that you see a Canadian tax accountant to firm up precisely how you stand rather than depend on your own layman's understanding or even for that matter, advice in a medium such as this. Tax jurisdictions these days can be very harsh where they feel tax has not been properly paid and the onus is on you to fully inform yourself as to the laws.