Many South Africans don’t understand their tax obligations if they exchange foreign currencies. Traders in need of foreign exchange services may choose to open an account with a broker that has a physical presence in South Africa or that operates out of the country.
Incorrectly, many investors believe that their offshore trading accounts provide them with tax-free gains.
Income earned in an offshore trading account by South African residents is subject to normal taxable treatment and must be reported in South African Rand.
Therefore, it doesn’t matter where the money comes from as much as who makes it.
We can have a better understanding of the taxable nature of Forex income if we examine Forex trading in the context of the obligations of South African residents to SARS.
How Forex falls under income tax
Traders profit on the spread between the buying and selling prices of two currencies by making educated guesses about the relative strength of each, with access to the markets provided by regulated brokers like IFX Brokers.
The worth of a currency pair can be affected by trade patterns, economic, political, and geopolitical events. Because of these factors, the foreign exchange market is very volatile on a daily basis, providing traders with fresh opportunities to make a profit.
Foreign exchange trading platforms provided by both international and South African brokers are available online, so you may do it from any device with an internet connection.
The words “trading” and “income” are key words in determining whether or not Forex trading is taxable. It is assumed here that you intend to generate income through forex trading (for profit).
To rephrase, any profits you make through forex trading will be subject to income tax at your individual marginal tax rate. That is to say, any money-making costs can be deducted.
According to South African law, you must include all of your foreign income, no matter how small, when filing your annual tax return. Taxpayers are also responsible for making provisional tax payments in the months of August and February.
There will be no Pay As You Earn (PAYE) withholding on the money you receive, so this is simply a method of settling your yearly tax bill.
It is crucial for expats to follow the right emigration procedures before leaving South Africa to avoid being taxed twice: once in their new country and once by South Africa.
A person must submit an application to both the SARB and SARS in order to depart South Africa. After relocating to a foreign nation, you may be subject to capital gains taxes, depending on your individual circumstances.
How to declare Forex income
Currency gains or losses would be recorded under “foreign revenue” or “business/trading,” depending on the context. Using the SARS income tax tables, a person’s tax rate would be calculated.
When figuring out how much money to expect, you need to factor in the monthly exchange rates published by SARS. These concerns are addressed in detail on the SARS webpage.