AuthorBy Jeffrey Cammack
Updated: January 12, 2021

Many South African forex traders are not sure what their legal tax obligations are towards the South African Revenue Service (SARS). Many trading accounts are overseas, and the gains made from their trading are not visible to SARS, some traders open trading accounts with forex brokers located in South Africa, or with brokers who have branches in South Africa. In this case, these traders’ capital won’t leave the country.

Trader Must Pay Tax On Earnings

It is a common misperception that traders don’t need to pay income tax on profits made in offshore trading accounts. If a South African resident generates profit from trading in an offshore trading account while residing within the borders of South Africa, the profit is regarded as normal taxable income and needs to be declared in South African Rand in their tax returns. In this case, it doesn’t matter where the income originates from, but rather where the person resides while generating that income.

Tax Rates for Individual Traders and Special Trusts

Forex traders who trade in their individual capacity and special trusts are subject to the following income tax rates:

SARS Pocket Tax Guide 2017/2018

However, traders are only required to pay income tax if their total income exceeds a certain annual threshold which is determined by their age.

SARS Pocket Tax Guide 2017/2018

For example, traders younger than 65 will only start paying tax when their total taxable income exceeds R75,750 per annum (an average of R6,312.50 per month). However, a trader who is the sole member of a closed corporation (CC), for example, can legally reduce their tax liability by utilizing his individual tax threshold plus his close corporation’s tax threshold. This is done by ‘employing’ the individual by the close corporation. This raises the trader’s tax threshold from R75,750 per annum to R151,500. In this case, the trader will only pay income tax when his profits exceed R151,500 per annum. Only one close corporation’s ‘tax threshold benefit’ may be used by an individual.

Tax Rates Business Entities

Forex traders should be aware that different South African business entities are subject to different tax rates. Here is a brief explanation:

Companies

Forex trading which is done through a registered South African company is subject to a flat tax rate of 28% of its taxable income:

SARS Pocket Tax Guide 2017/2018

Small Corporations

Small business corporations enjoy more leeway than companies and only start paying tax when their taxable income exceeds R75,750. Only after their taxable income exceeds R550,001 will they pay the same rate as companies (28%) but only on the portion of income that exceeds R550,001. The first R550,001 is taxed according to this table:

SARS Pocket Tax Guide 2017/2018

Trusts Other than Special Trusts

Trusts other than special trusts are taxed at a flat rate of 45%:

SARS Pocket Tax Guide 2017/2018

Tax Deductible Expenses

South African forex traders are entitled by the law to deduct from their taxable income, any expenses incurred in producing that income. Therefore, local forex traders should keep records of all expenses related to their trading activities, including staff remuneration, forex trading courses, money spent on trading software, office equipment, stationery, office rental, cleaning services, computer repairs, bank fees, etc. Traders can also deduct asset depreciation (wear and tear) from their taxable income. For example, the value depreciation of a forex trader’s computer used for trading or trading related tasks may be deducted from the income derived from his trading activities. Whether forex trading is done through a registered company, small business corporation, trust, or in someone’s personal capacity, all expenses incurred in producing the income may be deducted from the taxable income.

Provisional Tax

SARS Pocket Tax Guide 2017/2018

Forex trading is usually conducted as a business, and most South African traders usually don’t receive remuneration from a registered South African employer for their forex trading activities. These traders, therefore, need to register for provisional tax and make two provisional tax payments annually (one payment 6 months into the financial year and the other payment at the end of the financial year). Another payment, commonly known as the third or top-up payment, may be made to cover a potential shortfall in the second payment. Provisional tax payments are calculated on estimated taxable income and the estimates are submitted to SARS on an IRP6 return. Companies are also required to pay provisional tax. For more information on provisional tax please visit this page: Guide for Provisional Tax.

This article is a general guide only and is not intended as individual legal tax advice. For more specific information on South African tax legislation please consult a registered tax practitioner or the South African Revenue Service.

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Share your knowledge

  • Dawie says:

    Do you have to pay tax on all profits or only realised profits. What I mean is if you still have money in the trading account which are profits which you could still technical lose must you declare it. I understabd that one needs to pay tax on profits made and withdrawn from the account. But what about the profits in the account you are still using to trade.

    • Chris Cammack says:

      Hi Dawie, You need to pay taxes on all profits – it doesn’t matter where they are kept. This means that any profit in your trading account is still liable for taxation. Hope that helps.

      • Ashton says:

        Hi Chris,

        If the profit in my trading account is still liable for taxation, how would it be taxed if I don’t withdraw it to my bank account?

        For eg. Let’s say I made a profit of about R300K for a year and only withdraw R150K and keep the balance of the profit made in my trading account to trade. The R150K I’ve withdrawn would be taxed but what about the balance that I decided to keep in my trading account? How would that be taxed if its not even in my bank account?

        • Chris Cammack says:

          Hi Ashton,
          I’m afraid the govt does not really care where the profits are kept, as long as there is a profit made. But that aside, your trading account is an account in your name that has been opened by your broker – so the profit is technically in your account, even if it is not in the bank account that you use for day-to-day life.
          Hope that helps.
          Chris

          • Julian says:

            Hi Chris – thanks for answering the above questions to the other guys. Further to your reply to Ashton may I go one step further and ask the following:

            If you will be expected to declare all profits regardless if its in your normal SA bank account or in your SA forex broker account, does that mean that if i then want to transfer money from my trading account to my bank account (to use some of the cash for example), I will not be taxed again on that withdrawal, correct? (coz the money will already be taxed based on the fact that its in my trading account) —- or, am I wrong? IE I will be taxed again if I withdraw funds to my Standard Bank account? Please advise, thanks Julian

  • Heinrich says:

    Hi Chris,

    Related to Ashton’s question :

    If the account is in a foreign country ‘’ Aus Broker “; How would they know about the other 150k profit that has been left in the account if only 150k has been withdrawn ?

    Thanks

    • Chris Cammack says:

      Hi Heinrich,
      In this case – while the South African government may not be aware of the other 150k, you are still liable for the tax on it and will be breaking the law if you do not pay it. Hope that helps.
      Chris

  • Katleho says:

    Hi , I’m abit lost with this ” taxable income above certain amount ” how does one calculate that?ie how much would I pay on R1 000 000 withdrawn? 2. Can my money still be taxed if say iv stores ut on these digital platforms ie skrill ?
    Thank you.

    • Thapelo Serekego says:

      Taxable income is calculated annually so if in a year you made a total of R1,000,000 then you will be taxed 45% which is R450,000. If your money is saved in an eWallet like Skrill or Neteller, it will not be visible to SARS but according to the law, you must still disclose any profit you have withdrawn and pay tax in line with what you have made. I hope I’m clear.

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