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Part IV. Forex Taxation
Each trader sooner or later becomes concerned about the question of taxation on the income received from Forex trading because, as the well-known quote says, "Pay taxes and live peacefully." Unfortunately, paying taxes on Forex is not as straightforward as one would like, so in this part of our education, we will study this question in detail.
At first glance, Forex is classified as a financial market, just like the stock market. At first glance, it may seem that the principles of tax payment are the same in both markets. However, this is not entirely true. A security is a financial asset, and Russian legislation strictly defines all the nuances of working with this type of asset.
Regarding the taxation of securities transactions, the following should be noted. Tax is paid only at the moment of selling the security, and if the purchase price of the security is unknown to the tax agent, the seller is obliged to pay personal income tax (PIT) and submit an income declaration. If the tax agent knows the purchase price of the security prior to the sale, they themselves pay the income tax on behalf of the client and are required to provide them with Form 2-PIT upon the first request.
When it comes to the stock market, in relation to individual Internet traders, the purchase of securities occurs without their physical delivery, with a mandatory reverse selling operation. This means that the broker knows both the purchase price and the selling price of the financial asset and is responsible for paying the tax to the government. Naturally, this applies only to brokers registered in the territory of the Russian Federation. Brokers registered in offshore zones, for example, will not submit any declarations on your behalf, and in such cases, the burden of tax payment falls on your shoulders at your own risk.
As for the Forex market, the concept of a financial asset as such is absent. It involves purely trading currencies, albeit without their actual delivery. Moreover, when trading on mini accounts, the trader essentially plays against the broker, as orders for mini accounts are not placed in the interbank market. Therefore, this type of activity can confidently be classified as a form of gambling, and the broker itself differs little from a bookmaker.
Until recently, the situation regarding tax payment in the Forex market was unclear. However, on February 4, 2009, the Ministry of Finance of the Russian Federation published letter No. 03-04-05-01/41 "On the taxation of personal income tax (PIT) based on the income received from operations in the Forex market." The text of this letter is provided below.
The Department of Tax and Customs Tariff Policy has reviewed the letter regarding the taxation of income received from operations in the Forex market, and in accordance with Article 34.2 of the Tax Code of the Russian Federation (hereinafter referred to as the "Code"), provides the following clarifications.
According to paragraph 1 of Article 209 of the Code, the object of taxation for individuals who are tax residents of the Russian Federation is considered to be income received by them from sources in the Russian Federation and/or from sources outside the Russian Federation.
Furthermore, Article 210 of the Code establishes that when determining the tax base, all income of the taxpayer is taken into account, whether received in monetary or non-monetary forms, or the right to dispose of which has arisen, as well as income in the form of material benefits, determined in accordance with Article 212 of the Code.
Thus, income received by the taxpayer from operations in the Forex market is subject to taxation under the personal income tax based on general principles, applying the rate established by paragraph 1 of Article 224 of the Code.
Deputy Director of the Department of Tax and Customs Tariff Policy N.A. KOMOVA
As you can see, in an attempt to find new sources of tax revenue, the State has also targeted trading in the Forex market. However, it is unlikely that tax authorities will initiate "persecution of traders" in the near future, as it is difficult to determine the actual trading activity of a broker registered in an offshore zone. As for Russian brokerage companies and banks, it is likely that such tax will be automatically paid when attempting to withdraw funds to a settlement account. Ultimately, the decision of whether to pay taxes or not is up to you.