How is forex trading taxed in South Africa? (Online Guide)

How is forex trading taxed in South Africa?

Tax responsibilities for foreign currency traders in South Africa can be a mystery to many South Africans.

For this reason, some traders create accounts with forex brokers based in South Africa or with foreign brokers with South African offices.

Many traders are under the mistaken impression that profits earned in offshore trading accounts are exempt from paying taxes.

Those who gain money from trading in an offshore trading account while residing in South Africa must file their tax returns in South African Rand, which is considered normal taxable income.

To this end, who makes the money is more important than where they live, regardless of where it originates.

Taking a look at Forex trading as it relates to South African residents’ responsibilities to SARS will help us better understand the taxable nature of Forex income.

This is how Forex income is taxed and SARS regulations South African traders should be aware of.

Factors which make Forex income taxable in South Africa

Traders make money by speculating on the future value of various currencies, a practice which involves estimating how much one currency will grow or fall against the other when trading.

Trade flows, economic, political, and geopolitical events all have an impact on the value of a currency pair. As a result of these conditions, the daily volatility in the currency market offers new opportunities for profit for traders.

If you have an internet connection, you can trade currencies from your phone, laptop, tablet, or PC using online trading platforms supplied by international brokers or by South African brokers.

To answer the question regarding Forex trading’s taxability, you need to focus on the phrases “trading” and “income.” Here, it is strongly implied that you aim to make money by trading foreign exchange (for profit).

To put it another way, if you make money through forex trading, you’ll have to pay income tax on it at your marginal rate. In other words, you can write off any expenses you have to make money.

South African tax law requires that you report all of your international income, regardless of how much money you make, on your tax return each year. During the months of August and February, taxpayers must also pay provisional taxes.

The income you get will not be subject to PAYE, so this is not an extra charge but a way to pay your annual tax.

For those who have relocated, to avoid being taxed in your new country but still subject to South African tax, it’s imperative that you follow the correct emigration procedures before leaving South Africa.

To leave South Africa, one must apply to both the SARB and SARS. According to your unique circumstances, you may have to pay capital gains taxes after moving to another country.

The correct way to declare your Forex trading income

The forex profits and losses would be included in the “foreign revenue” and “business/trading” sections, respectively. The rate of taxation for an individual would be determined by their income, according to the SARS tax tables.

The SARS monthly exchange rates must be taken into consideration when calculating revenue. On its website, SARS has a section devoted to these issues.

Categories of Forex trading taxation by the South African Revenue Service (SARS)

 

Taxation of a business entity

Various factors should be taken into consideration before selecting whether to operate a firm as a corporation or an individual sole proprietorship, such as taxation and liability.

When forming a corporation in South Africa, keep in mind that, even if you later relocate to another country, the corporation will continue to be subject to South African taxation until it is dissolved.

The tax rate on forex trading undertaken through a South African registered firm is 28 percent of taxable income, with no exemptions or deductions.

Small business corporations, in contrast to corporations, are immune from tax until their taxable revenue exceeds R75, 750 in the year of incorporation.

Taxation of individuals

Individuals and special trusts who trade forex are subject to income tax based on the amount of money they earn from their trading. The only tax that a trader is required to pay is income tax – if their total annual income exceeds a specific annual level that is determined by their age.

Tax deductible expenses

South African forex traders are permitted to deduct any expenses incurred in the course of earning money from their taxable income.

Local forex traders should keep account of all of their trading expenses, including staff salary, training expenses, software purchases, office supplies, computer maintenance, and bank fees, in order to maintain track of all of their trading expenses.

Asset depreciation may also have the effect of reducing a trader’s taxable revenue (the wear and tear of a laptop). If a forex trader’s computer depreciates in value, the depreciation of his computer may be deducted from the earnings gained from his trading activity.

Taxable income can be reduced by any expenses incurred in producing that income, whether they are incurred through a registered company or through a small business corporation/trust, or whether they are incurred in an individual’s own personal capacity.

Provisional taxation

The majority of South African forex traders are not compensated by a legally recognized South African employer for their forex trading activity, which is a firm in the country.

In order to be legally compliant, these traders must register for provisional tax and make two provisional tax payments every year, which they must do in order to be legally compliant.

A third payment, frequently referred to as a “top-up,” may be made in order to make up for any shortfall in the second instalment.

In order to calculate provisional tax payments, SARS uses estimated taxable income. Provisional tax payments are subsequently reported to SARS on an IRP6 tax return. Companies must additionally pay a provisional tax, which is a small amount.

Why it is so important to have an FSCA-regulated broker

Forex brokers, advisors and intermediaries in South Africa must be registered with the Financial Sector Conduct Authority (FSCA) in order to give advice or intermediary services to clients.

It makes no difference whether the broker is based on South Africa or headquartered overseas. If you are not sure that a broker is permitted to provide services in South Africa, check the FSCA’s website to ensure that they are before hiring them.

In the same vein, if you’re relocating abroad, make certain that any broker you hire is legitimately licensed by completing background checks on them.

To ensure that your Forex trading is legal and above-board, we’ve compiled a list of some of the best regulated Forex brokers in South Africa for your convenience. Licensed and registered with the Financial Sector Conduct Authority (FSCA), each of these brokers is a legitimate option for investors.

IFX Brokers

Overview

IFX Broker’s distribution and market conduct are regulated by the Financial Sector Conduct Authority (Authorized Financial Services Provider number 48021). The issuance of CFDs is regulated by The Financial Markets Act, 2012.

To ensure the safety of your trading account funds, IFX Brokers adheres to stringent compliance and safety of funds standards. It’s safe to put your money in the hands of IFX Brokers.

Deposits made by customers are stored in separate bank accounts from those of the company. As such, they can only be used as collateral for trading by the client.

Pros and Cons

PROS

High leverage available

MetaTrader 4 is supported

Resources for learning are available

 

CONS

 

Features

FEATURE

INFORMATION

Regulation

FCA

Minimum deposit from

ZAR100

Average spread from

0.5 pips

Commissions from

NA

Deposit/Withdrawal Fees

NA

Maximum Leverage

1:500

Bonuses

NA

Customer Support

24/5

Tickmill

Overview

Tickmill South Africa (Pty) Ltd is authorised and regulated by the Financial Sector Conduct Authority (FSCA). Licence number: FSP 49464.

Payments can be made in a variety of ways, including bank transfer, credit/debit card, and Skrill. For traders, Tickmill provides the MetaTrader 4 trading platform, which is compatible with PCs, web-based trading platforms, and mobile devices.

Pros and Cons

PROS

STP model

Advanced trading software

Competitive pricing

Well regulated

High leverage

CONS

 

Features

FEATURE

INFORMATION

Regulation

FSA

Minimum deposit from

$100

Average spread from

0.1 pips

Commissions from

‎2 per side per 100,000 traded

Deposit/Withdrawal Fees

None

Maximum Leverage

1:500

Bonuses

$30 Welcome Bonus

Customer Support

24/5

HotForex

Overview

When it comes to forex brokers in South Africa, HotForex is an FSCA-regulated broker that can be trusted to conduct legitimate forex trading.

HotForex SA has been licensed by the Financial Services Commission of Australia (FSCA) since 09/02/2016 under the FSP number 46632.

The MT4 and MT5 trading platforms are available to all traders. There are 49 FX pairings to pick from, as well as CFDs on metals and indices, 56 stocks, 7 commodities, and 7 cryptocurrency pairs. The broker has a small minimum deposit requirement of only $5.

Pros and Cons

PROS

No deposit or withdrawal fees

Competitive spreads

 

CONS

High commission charges on the Zero account

Features

FEATURE

INFORMATION

Regulation

CySEC, DFSA, FCA, FSA, FSCA

Minimum deposit from

$5

Average spread from

0.0 pips

Commissions from

USD 0.03 per 1K lot.

Deposit/Withdrawal Fees

None

Maximum Leverage

1:1000

Bonuses

100% Supercharged Bonus

Customer Support

24/5

eToro

Overview

Due to its focus on providing copy-trading services, eToro is widely regarded as the world’s biggest social trading platform due to the fact that it offers investing opportunities in both equities and digital currency (cryptocurrencies).

Since eToro currently has more than 10,000,000 platforms worldwide, the company has shifted its focus to delivering social trading and copy trading opportunities.

Owners of accounts on this platform have the ability to automatically and in real time replicate the trading strategies of successful clients. Other features include an economic calendar, as well as a range of other tools to assist with actual trading activities.

Pros and Cons

PROS

Advanced copy trading software

Low minimum deposit

No deposit fees

CONS

High withdrawal fees

High trading fees for forex

Only one base currency available for accounts

Features

FEATUREINFORMATION
Regulation

CySEC, FCA, ASIC

Minimum deposit from$50
Average spread from

0.75 pips

Commissions from

No commission on stocks and ETFs

Deposit/Withdrawal Fees

$5

Maximum Leverage1:30
Bonuses

$50 Welcome Offer And $50 Per Referral

Customer Support

24/5 – multilingual

XTB

Overview

XTB is a forex, CFD, and cryptocurrency broker that operates in the United Kingdom. Founded in 2002, XTB presently has more than a dozen branches in more than ten countries, with the majority of them located in Asia.

All of these advantages are available through the XTB platform: personalized attention, a large library of instructional resources, and an award-winning platform.

Aside from being listed on the Warsaw Stock Exchange and popular with over 140,000 clients worldwide, XTB also provides access to more than 1500 global markets and is regulated by several international authorities, including the Financial Conduct Authority (FCA) (license number 522157), and the Cypress Securities and Exchange Commission (CySEC) (CIF Licence number 169/12).

Pros and Cons

PROS

Award-winning trading platform

Negative Balance Protection

Well regulated

CONS

Limited product portfolio

Features

FEATURE

INFORMATION

Regulation

KNF, FCA, CySEC and IFSC

Minimum deposit from

$250

Average spread from

1.02 pips

Commissions from

0.08% of trade value with $8 minimum

Deposit/Withdrawal Fees

$30 on withdrawals of less than $50

Maximum Leverage

1:500

Bonuses

$40 No Deposit Bonus

Customer Support

24/5

FXCM

Overview

FXCM provides CFD trading and a wide range of other goods and services in addition to forex trading. As a result of having a global presence, traders are able to have access to the most liquid markets.

Fast execution, strong and creative technologies are just some of the advantages of FXCM. One of the world’s leading providers of online trading services, it has been in operation for more than two decades.

Pros and Cons

PROS

Wide selection of advanced trading platforms

Low minimum deposit

High leverage

 

CONS

1.Limited range of asset classes

 

Features

FEATURE

INFORMATION

Regulation

FCA, ASIC, ACPR, FSP

Minimum deposit from

$50

Average spread from

1.3 pips

Commissions from

£4 per standard round-turn lot (£2 per side)

Deposit/Withdrawal Fees

None

Maximum Leverage

1:400

Bonuses

$20 Welcome Bonus

Customer Support

24/5

Oanda

Overview

OANDA was created in 1996 and is regulated in all of the world’s main financial markets. In addition to delivering competitive pricing on a wide selection of products, OANDA’s award-winning platform also includes cutting-edge trading tools and analytical instruments.

With six of the most respected financial watchdogs in the world overseeing Oanda, you can rest easy knowing you’re dealing with a reputable broker.

Oanda stands out as a top currency trading alternative because of its cheap entry requirements trustworthy trading platform.

Pros and Cons

PROS

User-friendly trading platform

Low minimum deposit

Low trading fees

CONS

Lack of decent customer service

High withdrawal fees

Limited instruments for forex and CFDs

Features

FEATURE

INFORMATION

Regulation

FCA, RFED

Minimum deposit from

None

Average spread from

1.6 pips

Commissions from

$0.01 USD per trade

Deposit/Withdrawal Fees

None

Maximum Leverage

1:100

Bonuses

None

Customer Support

24/5

Exness

Overview

In terms of transparency and regulation, Exness is one of the most trustworthy brokers in the industry, catering to both novice and experienced traders alike.

Comparatively low commissions on trades and other prices distinguish this broker from others. Exness has competitive spreads, pricing, and trading circumstances.

Traders can operate in a safe environment with a wide selection of financial products and top-notch trading platforms at their disposal.

Pros and Cons

PROS

Well-regulated

Tight spreads

Over 130 currency pairs

CONS

Features

FEATURE

INFORMATION

Regulation

CySEC, FCA

Minimum deposit from

$1

Average spread from

1.3 pips

Commissions from

3 USD and 10 USD per 1 lot for CFDs

Deposit/Withdrawal Fees

None

Maximum Leverage

1:2000

Bonuses

Standard +10% Bonus Programme

Customer Support

24/5 – multilingual

InstaForex

Overview

InstaForex is favoured by traders for a number of reasons, including the large number of tradable instruments, exceptional platform assistance, and trading accounts with fixed spreads.

InstaForex, a well-regulated broker with a large number of trading choices in comparison to other brokers, offers trading in over 100 different currency pairs.

There is no minimum deposit required to open one of four live, instant execution accounts with InstaForex.

Pros and Cons

PROS

Well regulated

High leverage

No minimum deposit

CONS

Inactivity and withdrawal fees

Limited product portfolio

Features

FEATURE

INFORMATION

Regulation

CySEC

Minimum deposit from

No minimum deposit

Average spread from

Average floating 0.8 pips

Commissions from

None

Deposit/Withdrawal Fees

None

Maximum Leverage

1:1000

Bonuses

30% Deposit Bonus

Customer Support

24/5

Markets.com

Overview

If you’re looking for an established and reliable brokerage firm, Markets.com is your best bet. With the broker’s global regulatory framework, consistent methodology, and great execution statistics, traders may feel confident dealing with Markets.com.

Over 2,200 assets are available for trading on the site, which caters to traders of all skill levels. Pure Forex traders will be drawn to the wide range of currency pairs and attractive spreads. Markets.com’s MarketsX platform strikes the perfect blend between simplicity and scalability.

Pros and Cons

PROS

Commission-free trading

Low minimum deposit

Tight, fixed spreads

Wide range of tradable assets

CONS

Customer support can be slow

The best trading conditions are only available on the Pro Account

Features

FEATURE

INFORMATION

Regulation

CySEC, FCA, ASIC, FSC, FSCA

Minimum deposit from

$100

Average spread from

1.9 pips

Commissions from

1%

Deposit/Withdrawal Fees

None

Maximum Leverage

1:300

Bonuses

$25 No Deposit Bonus

Customer Support

24/5

10 Best Forex Brokers with Segregated Bank Accounts in SA

10 Best Forex brokers with segregated bank accounts in South Africa

Overview

A segregated account is a separate bank account is one which is separate from the bank account belonging to a broker or company.

As such, through the use of a segregated account the broker is prohibited from using client funds to make more investments or cover any costs and losses suffered by the broker.

To put it another way, if the broker were to go bankrupt, the money traders have invested would be well-protected, and consumers would be reimbursed in accordance with applicable law.

These are the ten finest Forex brokers in South Africa that offer segregated bank accounts and high-quality trading conditions.

IFX Brokers

Overview

IFX Brokers Holdings (Pty) Ltd is a South African company registered by the Financial Sector Conduct Authority (FSCA) (licence number 48021) as a trading name for IFX Brokers Holdings (Pty) Ltd.

IFX Brokers offers a wide range of market spreads, as well as access to True ECN market conditions. At any given time, over 50 banks and dark pool liquidity providers price into the broker’s ECN, ensuring narrow spreads and deep liquidity.

Pros and Cons

PROS

High leverage available

MetaTrader 4 is supported

Resources for learning are available

 

CONS

 

Features

FEATURE

INFORMATION

Regulation

FCA

Minimum deposit from

ZAR100

Average spread from

0.5 pips

Commissions from

NA

Deposit/Withdrawal Fees

NA

Maximum Leverage

1:500

Bonuses

NA

Customer Support

24/5

FXTM

Overview

There’s a good reason why ForexTime has won multiple awards. FXTM is able to assist clients with any financial goals they may have.

They provide a wide selection of assets, platforms, account types, and resources to make trading as simple and efficient as possible.

FXTM is regulated by the FSC with License number C113012295, and must accordingly store all client funds in segregated bank accounts.

You may open an account in less than a minute using their online system and they offer a wide range of educational tools, including sample accounts and webinars.

Pros and Cons

PROS

Superb customer service

High maximum leverage

Great educational tools

CONS

Inactivity and withdrawal fees

Limited product portfolio

 

Features

FEATURE

INFORMATION

Regulation

CySEC, FCA, FSCA

Minimum deposit from

$100

Average spread from

0.9 pips

Commissions from

No commission

Deposit/Withdrawal Fees

$3

Maximum Leverage

1:500 on average

Bonuses

$300 Trading Bonus

Customer Support

24/5

AvaTrade

Overview

The Financial Services and Capital Markets Authority (FSCA) in South Africa is in charge of overseeing AvaTrade (licence number 45984).

As a result of its ease of use and large selection of free deposit and withdrawal options, AvaTrade has become a popular choice. Only two of AvaTrade’s selling features are its open cost structure and low trading fees.

Customer service is adequately provided by AvaTrade’s live chat facility. There are just a few drawbacks, like its limited range of forex, CFDs, and cryptocurrencies to choose from, but the educational opportunities are fantastic.

Pros and Cons

PROS

Broad range of tradable instruments

MetaTrader 4 and 5 available

Excellent educational resources

CONS

High EURUSD and inactivity fees

Features

FEATURE

INFORMATION

Regulation

Central Bank of Ireland, MiFID, ASiC, BVI

Minimum deposit from

$100

Average spread from

0.9 pips

Commissions from

No commission on Forex

Deposit/Withdrawal Fees

None

Maximum Leverage

1:400

Bonuses

First Deposit Bonus

Customer Support

24/5 – multilingual

eToro

Overview

Due to its focus on providing copy-trading services, eToro is widely regarded as the world’s biggest social trading platform due to the fact that it offers investing opportunities in both equities and digital currency (cryptocurrencies).

Since eToro currently has more than 10,000,000 platforms worldwide, the company has shifted its focus to delivering social trading and copy trading opportunities.

Owners of accounts on this platform have the ability to automatically and in real time replicate the trading strategies of successful clients. Other features include an economic calendar, as well as a range of other tools to assist with actual trading activities.

Pros and Cons

PROS

Advanced copy trading software

Low minimum deposit

No deposit fees

CONS

High withdrawal fees

High trading fees for forex

Only one base currency available for accounts

Features

FEATUREINFORMATION
Regulation

CySEC, FCA, ASIC

Minimum deposit from$50
Average spread from

0.75 pips

Commissions from

No commission on stocks and ETFs

Deposit/Withdrawal Fees

$5

Maximum Leverage1:30
Bonuses

$50 Welcome Offer And $50 Per Referral

Customer Support

24/5 – multilingual

XTB

Overview

XTB is a forex, CFD, and cryptocurrency broker that operates in the United Kingdom. Founded in 2002, XTB presently has more than a dozen branches in more than ten countries, with the majority of them located in Asia.

All of these advantages are available through the XTB platform: personalized attention, a large library of instructional resources, and an award-winning platform.

Aside from being listed on the Warsaw Stock Exchange and popular with over 140,000 clients worldwide, XTB also provides access to more than 1500 global markets and is regulated by several international authorities, including the Financial Conduct Authority (FCA) (license number 522157), and the Cypress Securities and Exchange Commission (CySEC) (CIF Licence number 169/12).

Pros and Cons

PROS

Award-winning trading platform

Negative Balance Protection

Well regulated

CONS

Limited product portfolio

Features

FEATURE

INFORMATION

Regulation

KNF, FCA, CySEC and IFSC

Minimum deposit from

$250

Average spread from

1.02 pips

Commissions from

0.08% of trade value with $8 minimum

Deposit/Withdrawal Fees

$30 on withdrawals of less than $50

Maximum Leverage

1:500

Bonuses

$40 No Deposit Bonus

Customer Support

24/5

FXCM

Overview

FXCM provides CFD trading and a wide range of other goods and services in addition to forex trading. As a result of having a global presence, traders are able to have access to the most liquid markets.

Fast execution, strong and creative technologies are just some of the advantages of FXCM. One of the world’s leading providers of online trading services, it has been in operation for more than two decades.

Pros and Cons

PROS

Wide selection of advanced trading platforms

Low minimum deposit

High leverage

 

CONS

1.Limited range of asset classes

 

Features

FEATURE

INFORMATION

Regulation

FCA, ASIC, ACPR, FSP

Minimum deposit from

$50

Average spread from

1.3 pips

Commissions from

£4 per standard round-turn lot (£2 per side)

Deposit/Withdrawal Fees

None

Maximum Leverage

1:400

Bonuses

$20 Welcome Bonus

Customer Support

24/5

Oanda

Overview

OANDA was created in 1996 and is regulated in all of the world’s main financial markets. In addition to delivering competitive pricing on a wide selection of products, OANDA’s award-winning platform also includes cutting-edge trading tools and analytical instruments.

With six of the most respected financial watchdogs in the world overseeing Oanda, you can rest easy knowing you’re dealing with a reputable broker.

Oanda stands out as a top currency trading alternative because of its cheap entry requirements trustworthy trading platform.

Pros and Cons

PROS

User-friendly trading platform

Low minimum deposit

Low trading fees

CONS

Lack of decent customer service

High withdrawal fees

Limited instruments for forex and CFDs

Features

FEATURE

INFORMATION

Regulation

FCA, RFED

Minimum deposit from

None

Average spread from

1.6 pips

Commissions from

$0.01 USD per trade

Deposit/Withdrawal Fees

None

Maximum Leverage

1:100

Bonuses

None

Customer Support

24/5

Exness

Overview

In terms of transparency and regulation, Exness is one of the most trustworthy brokers in the industry, catering to both novice and experienced traders alike.

Comparatively low commissions on trades and other prices distinguish this broker from others. Exness has competitive spreads, pricing, and trading circumstances.

Traders can operate in a safe environment with a wide selection of financial products and top-notch trading platforms at their disposal.

Pros and Cons

PROS

Well-regulated

Tight spreads

Over 130 currency pairs

CONS

Features

FEATURE

INFORMATION

Regulation

CySEC, FCA

Minimum deposit from

$1

Average spread from

1.3 pips

Commissions from

3 USD and 10 USD per 1 lot for CFDs

Deposit/Withdrawal Fees

None

Maximum Leverage

1:2000

Bonuses

Standard +10% Bonus Programme

Customer Support

24/5 – multilingual

InstaForex

Overview

InstaForex is favoured by traders for a number of reasons, including the large number of tradable instruments, exceptional platform assistance, and trading accounts with fixed spreads.

InstaForex, a well-regulated broker with a large number of trading choices in comparison to other brokers, offers trading in over 100 different currency pairs.

There is no minimum deposit required to open one of four live, instant execution accounts with InstaForex.

Pros and Cons

PROS

Well regulated

High leverage

No minimum deposit

CONS

Inactivity and withdrawal fees

Limited product portfolio

Features

FEATURE

INFORMATION

Regulation

CySEC

Minimum deposit from

No minimum deposit

Average spread from

Average floating 0.8 pips

Commissions from

None

Deposit/Withdrawal Fees

None

Maximum Leverage

1:1000

Bonuses

30% Deposit Bonus

Customer Support

24/5

Markets.com

Overview

If you’re looking for an established and reliable brokerage firm, Markets.com is your best bet. With the broker’s global regulatory framework, consistent methodology, and great execution statistics, traders may feel confident dealing with Markets.com.

Over 2,200 assets are available for trading on the site, which caters to traders of all skill levels. Pure Forex traders will be drawn to the wide range of currency pairs and attractive spreads. Markets.com’s MarketsX platform strikes the perfect blend between simplicity and scalability.

Pros and Cons

PROS

Commission-free trading

Low minimum deposit

Tight, fixed spreads

Wide range of tradable assets

CONS

Customer support can be slow

The best trading conditions are only available on the Pro Account

Features

FEATURE

INFORMATION

Regulation

CySEC, FCA, ASIC, FSC, FSCA

Minimum deposit from

$100

Average spread from

1.9 pips

Commissions from

1%

Deposit/Withdrawal Fees

None

Maximum Leverage

1:300

Bonuses

$25 No Deposit Bonus

Customer Support

24/5