Taxes on Forex earnings
Once you have started regularly making money on the foreign exchange market, the question naturally arises: do you need to pay taxes on Forex?
The answer is clear - it is necessary, of course, if your annual income is only a few tens of dollars, not a single tax inspector will bother you, but in the case when the profit is already calculated in thousands of dollars, you should definitely think about taxation.
Moreover, it is better to do this yourself, without waiting for a visit from the tax inspector, who does not always know how to calculate correctly.
You will have to do everything yourself, so it would be a good idea to find out what taxes you have to pay when trading forex and what the procedure for paying them is.
Forex taxes are the taxation of profits received as a result of trading, namely profits, minus overhead costs that contributed to the trading.
Type of tax - all profits received from working on Forex are subject to income tax, in Russia its rate is 13%. Do not believe inspectors' statements that this type of income relates to gambling, otherwise you will have to pay much more.
At the same time, the deposit interest accrued by the broker on the account balance should be entered in a separate column; the Forex profit tax here will be as much as 35%.
Tax base - you pay on profit, and not on income, otherwise the amount of payments may exceed the amount of earnings. This means the financial result, namely the difference between the amount of successful and unprofitable transactions.
For example, during the reporting period of trading, 100 transactions were made, of which 35 were unprofitable in the amount of 3,700 US dollars and profitable in the total amount of 7,800 US dollars.
Net profit is 7800 – 3700 = 4100. After the calculations, we proceed to calculating the tax itself 4100 x 15/100 = 615 US dollars.
It is clear that the amount received should be converted into rubles at the rate of the Central Bank of Russia.
When to pay – Forex profit tax is paid after the end of the year, no later than April 30 after the end of the reporting period.
Where to pay – you can obtain information about where to pay your income tax from your tax inspector at your place of residence. This is the account number and payment code.
Filing a declaration - after you have calculated your profit, you should proceed to filling out the tax return itself, it is submitted before the end of April, but it is better not to delay this matter, since it is possible that some adjustments may be made by the tax authorities and it is better not to do this at the last moment.
Additional documents – it is advisable to immediately take additional documents with you to the tax office, as questions will definitely arise. You will need a printed account statement for the year, and make a small sign on your own indicating the amount of losses and the amount of profit. A beautiful design will help you quickly prove your case.
The process of filing a tax return seems quite complicated only the first time, after which you will definitely know all the pitfalls and will be able to deal with Forex taxes in just a few hours.
How to avoid paying taxes on Forex earnings?
This question comes up very often after a trader calculates how much he should pay at the end of the reporting period.
On the one hand, not paying seems to be bad, but our reality is that those who pay and always want to be law-abiding are punished, because the one who evades still needs to be caught.
And then there is a completely legal way not to pay taxes on earnings on Forex and remain within the law.
The same option with offshore companies allows you to do this; its only drawback is the price, since maintaining an offshore company also has its own cost.
That is, if you earn $1,000 a month, it will be easier for you to pay 13% of this amount, but if your income is more than $5,000, you can already think about offshore.
The cost of the issue is about $1,000, this amount includes opening a company and an account in the payment system, about the same will cost the maintenance of the company per year.
That is, if on $60,000 you will have to pay 15% or $9,000 in tax per year, then in the case of an offshore company it is only 1,000, the choice is obvious.
However, it should be noted that all expenses will also have to be spent through the company, using a corporate card. If you want to transfer money to Russia to your personal account, you will need to pay tax on both dividends received. And this is again 13% for residents of the Russian Federation.
That is, everything needs to be counted and weighed ten times in order to make a truly correct and informed decision.
Another option could be to obtain citizenship in one of the offshore zones; doing this for money is not difficult, but quite expensive. After this, you become a resident without a tax haven and register with the broker as a resident, for example of Dominica, after which all profits received are not taxed since they were received outside of Dominica.
It’s up to you to decide whether or not to pay taxes on earnings on Forex. For myself, I use the offshore option, since I practically don’t use free services for which taxes are usually paid.