Taxes and Forex market. Surely if you start trading on the currency market, at some point you will be attacked by doubts…taxes and Forex? Yes, my friend, Forex is a taxable activity in almost every country in the world.
In my particular case I will talk about taxes and the Forex market in Spain, although it is quite similar to what happens in other European countries, with differences in the amount paid for the profits generated, I believe that in France taxes are the best.
Taxes – Broker, within taxes and the Forex market
One question I was recently asked is about the Broker. At the moment, the Brokers we employ are almost everyone outside our country of origin: United Kingdom, Cyprus, Greece, USA…, Brokers who are not established in Spain are not obliged to provide the Spanish Treasury with information on their clients’ movements unless requested to do so.
In case of cooperation with a broker based in Spain, the latter will transfer the information to the Treasury.
When the tax return period (April to May) comes in, referring to the previous year, you can view the tax data to find out what the Treasury already knows about your finances.
If your Broker has submitted information to the Treasury, you will see the transactions made…in my case, transactions made with shares always appear to me, but those made with Cfds and Forex do not because my Cfds Broker is not national.
I imagine that if it is a domestic market, then movements should appear, although I have doubts because these are OTC markets.
In this case, it is our duty when filing a tax return to reflect the income generated by currency trading.
The place where the Broker is established does not matter when declaring taxes, because taxes are declared at the taxpayer’s place of residence.
I’m talking about «profits» from trading, but you can and should declare losses even if you don’t compensate them in the current refund, you have 4 years to compensate them in subsequent refunds.
Who is obliged to declare profits from business activity in the tax return?
Your personal situation can vary greatly. I know about all kinds of traders.
The market can withstand everything from the unemployed, housewives, students, businessmen, employees, etc., to the self-employed.
Logically, not everyone has the same level of income and therefore some entrepreneurs may be required to declare for their work and others do not because they do not have an income from work.
I am not going to interfere with the income from work, but with commercial activities, although it may be required to declare my work, then all other incomes must be added.
Persons who are excluded and therefore ‘do not have to submit a tax return’ are those who have obtained exclusive income:
1) Reimbursement from work, with amounts equal to or less than EUR 22 000 per year, provided they are from a single payer.
Where there are several payers, provided that the sum of the second and subsequent payers does not exceed EUR 1 500.
When income from work derives from passive benefits, for example social security or pension schemes.
(2) The limit is set at EUR 12 000 per year when
Labour income comes from more than one payer, and the sum of the amounts received from the other and the others exceeds EUR 1 500 per year.
When compensatory pensions are received from a spouse or a food pension, they are not exempt.
Where the payer of income from work is not obliged to withhold payment.
After receiving full income from work, subject to a fixed rate of withholding tax.
Income from movable capital and capital gains to be withheld or paid into an account, with an overall limit of EUR 1 600 per year.
4 Real estate income, income from treasury bills and grants for the purchase of an officially protected dwelling or a price valuation of up to EUR 1,000 per year.
No declaration is required from anyone who derives full income from work, capital or business activities, or capital gains that do not exceed EUR 1,000 in total, nor from those who have only incurred capital losses of less than EUR 500.
How much will I pay taxes for trading on the Forex market?
Taxes on foreign currency trading are exactly the same as for trading stocks, Cfds, Etfs or any other investments in the financial markets, they are capital gains or capital gains.
Differences in assets are taxed according to the savings tax base in the tax return.
The government periodically changes taxes and parentheses.
Income tax in 2017 is as follows:
From EUR 0 to EUR 12 450, the tax rate is 19 %.
From EUR 12 450 to EUR 20 200 – up to 24%.
Between 20,200 and 35,200 euros, we reach 30%.
And between €35,200 and €60,000 the tranche increases to 37%.
When you jump over 60,000 Euros, the tax bracket rises to 45%.
Imagine that you made 100 transactions in a year. These transactions will be winners and losers. The winners reported 10,000 Euros, while you left 2,000 Euros in the losers, which is a profit of 8,000 Euros, is for the amount you are going to pay tax on.