You have your regular 9-to-5 job, and your boss is working you like a slave such that even when you are asleep, you dream of missed deadlines, but you still can’t make ends meet.
So you recall your friend told you they are making oodles of cash trading and you end up
deciding to give it a try.
But remember, the taxman wants his cut so he can pay Jacob Zuma’s salary, for eating at the National Dialogue and then bailing out Eskom.
Because you have no designs on being in the news for tax evasion, you want to be tax compliant.
Senior tax consultant-ops manager at CH Consulting Johandrie van Tonder says if you’re living and are a tax resident of South Africa, “the rule is straightforward: you pay tax in South Africa on your worldwide income, regardless of where the trading platform is based.”
He says our tax law follows the principle of residency-based taxation.
“This means that if you’re a South African tax resident, Sars expects you to declare and pay tax on all income you earn globally – whether that income comes from a local employer, a US trading platform, or a European broker,” he says, adding that the location of the trading platform does not change your tax obligation to Sars.
But then you want to know what counts as taxable trading income?
Van Tonder says from profits from trading in shares, forex, crypto, CFDs, etc., as well as on interest, dividends or capital gains from investments.
“Even if the income never touches your South African bank account, meaning it remains offshore, Sars still requires you to declare it as accrued to you.”
He adds that there is such a thing as double taxation relief. Say what?
“It just means if you’ve already paid tax on the same income in another country, South Africa has double taxation agreements with many countries, so you don’t pay tax twice,” Van Tonder says.
You’d then typically be able to claim a foreign tax credit when filing your return, “but the shortfall needs to be paid locally.”
He advises that you keep detailed records – trade statements, broker reports, withdrawal records.
“You will need to classify correctly if your activity is trading or investment because you
either have to pay income tax or capital gains tax.
“Disclose all foreign income in your annual income tax return (ITR12) and in your biannual provisional tax return (IRP6), if you are seen as a provisional taxpayer,” he says.
“If unsure, seek advice, especially if trading crypto or using offshore structures.”
