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How do I account for online Forex Trading in my income tax return?

Posted 20 August 2012 under Tax Questions


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A little background on myself. I am a salaried employee of the department of health in South Africa. I am registered with eFiling and have been submitting tax returns since 2008/09.

I have a hypothetical question on forex trading. If I make say R300 000 suppose in the 2012/2013 tax year year and the amount I deposited was about R50000to fund the account, then what would my taxation be? Or at least what would the percent on taxation be and on which what amount would that percentage be taken off? The nett or the total?

My second question follows on from the first. If in the next tax year I do not make any further deposits into my forex account, instead use the funds/profits made from the previous tax year to make profits of a further R300 000, what would my interest be and against which amount would it be calculated against?

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TaxTimTaxTim says:
10 August 2012 at 17:22

You would be taxed on the profit made, if you are trading the forex and not just holding onto it for a few years. The rate at which the profit would be taxed is based on the rest of your income. The profit is added to your other income and then applied against the tax tables to calculate what your tax payable is. Remember you will only pay tax on the income from trading and not from money which just sits in the account earning interest. That interest would be subject to tax, but only if it is greater than R22 800 per year.

In response to your second question - If you are doing this, then your trading may be seen as similar to trading stock in which case the Income Tax Act has specific rules for. Essentially your opening and closing balances would be taken into account in calculating your actual profit each year. If however it is a straight profit that you are using then again whatever new profit you make that year would be seen as taxable in your hands and added to your other income to determine your taxable income,

Either way the trader should be sending you an income tax statement detailing the profit earned on the actual trades and the interest earned on the balance in your account. This would then be added to your salaried income and the the tax payable would be calculated based on the tax tables.


Johneyza says:
10 August 2012 at 18:59

Thanks for the prompt reply. So,on my efiling chart, where would I have to mention the profit taxable if my eforex trading is similar to trading stock?

The currency traded in is in dollars and I have not transferred any amount to my bank account yet(profit that is), I keep trading on with the profits. So would the tax be applicable only when I transfer it into a bank account? There is no interest that is collected while it stays on in the forex account.

(just by the way,its an online account,and I do the trading myself as an amature in my spare time).


TaxTimTaxTim says:
10 August 2012 at 20:46

SARS have had a difficulty monitoring this type of income earning activity. On your tax return you need to complete the on local business section and put in all your income - you will complete the gross income for the total amount received and then cost of sales for what you actually started with. Ideally you should keep a running spreadsheet so you can calculate exactly what the overall effect was, but you would have the amount contributed as the "cost of sales" and the year end balance as the gross income amount. Remember as well that you can deduct any other expenses that relate to earning this income, but these expenses must relate to the income and not be of a personal nature. You would include those in the next page of the return. The dollar amount would need to be translated at the SARS average rate for the year, which you can find on their website - http://www.sars.gov.za/home.asp?pid=54666

South African tax residents pay tax on their worldwide income regardless of whether it is received into their local accounts or not so you would be liable for tax on the income earned, even if it is in dollars.


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