Do forex traders pay tax in South African
Generally, all forex traders in South Africa are expected to pay tax on all their capital gains in forex. Even when the profits have been realized using an offshore account. As long as the trader resides in South Africa at the moment the profits were made, he will be expected to declare them as capital gains and pay tax on them.
The total tax to pay from income realized from forex trading in South Africa is calculated after all expenses made on trading have been deducted especially if one has an account manager. The fees paid to the account managers are to be subtracted from the gross income. The remaining balance is considered as the net profit and the trader is expected to pay tax on them.
To make it easy for calculating the profits made from forex trading, all local forex traders are expected to keep a good record of all transactions related to their forex trading activities. Also, it is advisable to convert the remaining profits after all expenses have been subtracted to the local currency known as the South African rand.
More so, for one trading using a business name such as a private company, large corporation, or small business corporation; the tax payment for this category is usually classified as corporate income tax (CIT).
Finally, failure to declare one's profits from forex trading attracts some penalties.
What is the recommended method for tax payment for all South African traders？
Forex trading is often a long-term investment. This means the profits are not usually calculated monthly. Therefore income from forex trading may not be subject to PAYE which means Pay As You Earn. PAYE is a system of monthly tax payments to SARS.
To navigate this monthly PAYE for all profits realized from forex trading, the South African trader needs to register as a provisional taxpayer with SARS.
All provisional taxpayers in South Africa are required to make two provisional tax payments each year. The first tax payment is to come within February while the second payment is expected to be made before the end of August of every year.
Provisional tax payment helps all South African forex traders to spread their tax obligations over the tax year and avoid frequent monthly tax payments. Also, all corporate businesses are required to register as provisional taxpayers.
