Day trading tax

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drnaphtali

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Hey guys,

Do you guys have any idea on how tax works on day trading?

So I have an online account at IG. Do you get taxed on the amount of profit you make in the account, or the amount that you actually get paid out?

I.e. say I start the year with R10,000 in the online account. At the end of the year the account sits at R100,000. I withdraw R50,000 into my bank account. Am I taxed on the R90,000 (R100,000-R10,000) or on the R50,000?

What would happen if I sit in another country for 7months a year?

Cheers

Edit: I would like to add....the money that is in the account is still at risk...I can just as easily lose all of it. That is why my feeling is that it is only fair to get taxed on the amount that is withdrawn from the account.
 
drnaphtali said:
Hey guys,

Do you guys have any idea on how tax works on day trading?

So I have an online account at IG. Do you get taxed on the amount of profit you make in the account, or the amount that you actually get paid out?

I.e. say I start the year with R10,000 in the online account. At the end of the year the account sits at R100,000. I withdraw R50,000 into my bank account. Am I taxed on the R90,000 (R100,000-R10,000) or on the R50,000?

What would happen if I sit in another country for 7months a year?

Cheers

Edit: I would like to add....the money that is in the account is still at risk...I can just as easily lose all of it. That is why my feeling is that it is only fair to get taxed on the amount that is withdrawn from the account.
Click to expand...

I think you only get taxed on what is being paid into your bank account as income tax
 
I would think that you get taxed on the profits that you have made from trading regardless of whether you withdraw it or not. Otherwise you could leave the profits in the trading account for 3 years and only pay capital gains tax on the withdrawal.

That said I'm neither a lawyer nor an accountant so the above is just speculation.
 
Jehosefat said:
I would think that you get taxed on the profits that you have made from trading regardless of whether you withdraw it or not. Otherwise you could leave the profits in the trading account for 3 years and only pay capital gains tax on the withdrawal.

That said I'm neither a lawyer nor an accountant so the above is just speculation.
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Thats what I do.

I only get taxed when I withdraw from my Forex account

http://www.ig.com/uk/spread-betting/cfd-vs-spread-betting
 
You will get taxed on profits.
But:
CGT if its an investment (i.e. if your aim was to leave money there for a few years).
Income Tax if you using it too make quick money - Share trading.
Dont ask me how they prove it - thats SARS - i think they look at how many times you buy and sell shares each year.
 
You get taxed on profit (income) for that year regardless of whether the profit is sitting in the bank, in your account, in other shares, under the bed or in your aunties bra.
 
Dammit I will declare my tax today to get in the good books here is the answer:

A Fin24 user trading in forex writes:

I am trading in forex and would like to know whether I am subject to tax when I bring my earnings into the country. I am happy to declare these.

What would I declare these under and if these are subject to tax, would you be able to advise me at what rate?

Marc Sevitz of TaxTim responds:

Forex gains and losses would be declared under the “foreign income” section and then in the “business/trading” box.

The rate of tax would be dependent on the taxpayer’s income and the Sars tax tables would need to be used here.

Furthermore, the income would need to be calculated using the Sars monthly exchange rates.

These can be found on the Sars website.

The expenses incurred while earning this forex income can be deducted as well.

EDIT ( but looks like it's only when I bring it into the country ie withdraw into my bank as I originally stated )
 
drnaphtali said:
Hey guys,

Do you guys have any idea on how tax works on day trading?

So I have an online account at IG. Do you get taxed on the amount of profit you make in the account, or the amount that you actually get paid out?

I.e. say I start the year with R10,000 in the online account. At the end of the year the account sits at R100,000. I withdraw R50,000 into my bank account. Am I taxed on the R90,000 (R100,000-R10,000) or on the R50,000?

What would happen if I sit in another country for 7months a year?

Cheers

Edit: I would like to add....the money that is in the account is still at risk...I can just as easily lose all of it. That is why my feeling is that it is only fair to get taxed on the amount that is withdrawn from the account.
Click to expand...

Tax is paid on net profit irrespective if it is sitting in your trading account or your bank account. Your broker will send you a statement indicating all trades for the tax year, your cost, proceeds, fees, etc.

Thor187 said:
I think you only get taxed on what is being paid into your bank account as income tax
Click to expand...

This is incorrect.

You will need to hold a share for 3 years in order for it not to be considered as trading income.
 
Okay....that sucks! :D

So what happens when I sit in the Seychelles while trading...
 
Our tax system is a residence based system so if you are out of the country for a certain amount of time(183 days in the tax year) you are not considered a resident for income tax purposes.
 
I trade multiple times per year on my online share trading account, i.e. about +/- 50 times a year. I declare to SARS as a capital gains and I get taxed on that. I receive a capital gains document from my online share trading account broke and all I do is fill in the SARS IRP5 form and enter the amounts. This is even though I never transfer any money from my online share trading account to my bank account.

My worry, and question, is will I be taxed again if I, say, transfer R50k from my online share trading account to my bank account? This is assuming I've been paying capital gains tax every year without fail? And also assuming that the R50k is being transfered after, say, a decade of trading and never transferring any amount from my online share trading to my bank account?
 
Sly21C said:
I trade multiple times per year on my online share trading account, i.e. about +/- 50 times a year. I declare to SARS as a capital gains and I get taxed on that. I receive a capital gains document from my online share trading account broke and all I do is fill in the SARS IRP5 form and enter the amounts. This is even though I never transfer any money from my online share trading account to my bank account.

My worry, and question, is will I be taxed again if I, say, transfer R50k from my online share trading account to my bank account? This is assuming I've been paying capital gains tax every year without fail? And also assuming that the R50k is being transfered after, say, a decade of trading and never transferring any amount from my online share trading to my bank account?
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Trading multiple times a year would indicate that those profits should actually be taxed at "income tax" rates (ie: not CGT) as the profits and losses are not capital in nature.

Transferring between accounts has no tax implications - your "date" for tax is the day you sell whatever share it is.

Eg: You purchase a share on 1 March 2016 for R50 and sell it 30 July 2016 for R45 (R5 loss). You have to declare this in your tax return for the tax year ended 28 February 2017. If you transfer the remaining R45 into another account ten years later there is no tax implication (no receipt/accrual).
 
Yep... Sounds like you will eventually be nailed by sars for declaring this as capital gains and not as the profit of a professional trader.
 

Thanks for the info.

mister said:
Yep... Sounds like you will eventually be nailed by sars for declaring this as capital gains and not as the profit of a professional trader.
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I hope they won't notice. I have been audited before by SARS, no problem so far.
 
I can confirm you should be taxed via normal income tax rules. It is clear that your intent with trading is to earn an income, and not to leave the funds for long term capital growth. You should only be taxed on your profits, essentially your selling price less your buying price, less any associated expenses that you incur throughout the year like office costs, internet and depreciation on your laptop etc.

As far as sitting in the seychelles for 7 months goes..

An individual is deemed ordinarily resident if SA is the country “to which they naturally and as a matter of course return from their wanderings” even if no days of a given tax year were spent in South Africa. It is an enquiry of fact as to whether a person is ordinarily resident.. Factors such as owning a home in SA while working overseas would be indicative of being ordinarily resident. For ordinary residents, physical residence tests do not apply.

In the event that someone is not ordinarily resident they will be deemed physically resident for tax purposes if they are in SA for more than 91 days in the current year of assessment, as well as more than 91 days in each of the preceding five tax years. On top of that at least 915 days in total must have been spent in SA over the last 5 years.. An individual is deemed not to be physically resident if they are outside of SA for a continuous period of at least 330 days. Residency then terminates from day 1 of the 330 day period.

In the case of you being ordinarily resident, income earned from an employer outside SA will be exempt from SA tax if the following requirements are met:

- Must be outside of SA for a period exceeding 183 days in aggregate during any 12 month period
- Must be outside is SA for at least 60 continuous days during that 12 month period
- Services for which income was earned must have been rendered during the periods absent from SA.

Since you're self employed those rules won't apply. Therefor you're bound to SA tax laws as long as you pass the ordinary or physical residence test.
 
vash87 said:
I can confirm you should be taxed via normal income tax rules. It is clear that your intent with trading is to earn an income, and not to leave the funds for long term capital growth. You should only be taxed on your profits, essentially your selling price less your buying price, less any associated expenses that you incur throughout the year like office costs, internet and depreciation on your laptop etc.
Click to expand...

I don't trade to earn an income, I trade to try grow my portfolio quicker. I buy and sell shares regurlaly but my profits remain in my online share trading account. I don't transfer the profits I make from my online share trading account to my personal savings/cheque account. I haven't done so in 5 years or so. I use my profits to try make even more money.

If I made profits, and transferred money monthly from my online share trading account to my savings/cheque account then I'd understand when SARS say I trade for income. But in my case I trade for long term investment. I hope I make sense?
 
Sly21C said:
I don't trade to earn an income, I trade to try grow my portfolio quicker. I buy and sell shares regurlaly but my profits remain in my online share trading account. I don't transfer the profits I make from my online share trading account to my personal savings/cheque account. I haven't done so in 5 years or so. I use my profits to try make even more money.

If I made profits, and transferred money monthly from my online share trading account to my savings/cheque account then I'd understand when SARS say I trade for income. But in my case I trade for long term investment. I hope I make sense?
Click to expand...

You are not taxed on bank transfers, you are taxed on profit, irrespective of where the profits occur or subsequently reside.
 
Sly21C said:
I don't trade to earn an income, I trade to try grow my portfolio quicker.
Click to expand...

In other words, you are a professional trader, and must include your profits minus losses as income, and not capital gains.
 
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