Is Forex Trading Taxable in SA?

Is Forex Trading Taxable in SA

Profit is earned on the exchange of currencies between individuals, financial institutions, businesses, investment firms and banks. Tax can range from 18% to 45%, depending on profits, and you can use this guide to find out if Forex Trading is Taxable in SA.

Forex trading is taxable because it is classified as a form of income and a personal Income Tax Return form must be submitted, but Forex can also be listed as foreign income on the ITR12 form.

Please note that this article should only be used as a general guide and not as legal documentation or for tax advice. All tables were sourced directly from official government websites. 

 

Forex Trading in South Africa

Since 2010, Forex trading has been listed as a legal income-generating activity in South Africa, and research suggests that there are around 1.3 million South African Forex traders.

If you are interested in Forex trading, you can view our list of the 30 best SA Forex brokers, which allow South African citizens to trade on their platforms and servers.

As a South African Forex trader, you may want to choose a regulated Forex broker with a very low minimum deposit because the exchange rates can significantly increase the initial amount you planned to invest, which also increases your exposure to risks.

Luckily, there are plenty of regulated brokers to choose from and many of them have minimum deposits ranging from $1USD to $500 USD and above. 

 

Is Tax Payable on Forex Trading in South Africa?

Yes, Forex trading is taxable in South Africa because it is classified as a legal form of income. It can also be listed as foreign income, but it will still be taxable, even if profits are generated using off-shore trading accounts.

 

Residence-based Tax Systems

Residents of South Africa are obliged to pay tax on any income received, regardless of which country it comes from. 

This is based on laws implemented by the South African Revenue Services (SARS), and all residents of SA are subjected to a Residence-based tax system.

A residence-based tax system implies that all residents are taxed on income earned worldwide and tax returns must be submitted, and non-residents are only taxed on local income generated.

 

Provisional Tax

Businesses and individuals in South Africa are required to register as provisional taxpayers with SARS, and two provisional payments are required every year.

Provisional tax does not increase the tax you pay, but it gives taxpayers an opportunity to pay two amounts each year to avoid paying large sums at once.

Every tax year, one provisional payment is usually due before the end of August, and the other is due at the end of February.

Taxpayers have the option of making a third payment after the end of a tax year, but this must be finalized before a tax assessment is issued by SARS.

Please note that Forex trading is not subject to PAYE (Pay As You Earn), which requires monthly tax payments to be made on income generated by South African citizens.

 

Tax payable on interest earned from a Forex account

In South Africa, interest earned is taxable once it exceeds a certain limit, as indicated in the respective table below. 

If the profits you generate on interest earned exceed these amounts, you will be required to add this income to other interest revenue and it will be taxable in the specific tax year.

 

How to declare your Forex trading profits

All South African residents who generate income from Forex trading, are required to declare the total amounts on their annual tax return forms.

This is why it is important for South African Forex traders to keep all documentation, receipts, statements and any other trading documents, safe and organised so that it can be referenced when necessary.

If profits generated from Forex trading are not declared to SARS, penalties will be payable on the amounts received.

If you earn income from Forex trading as a business entity, then trading profits are subjected to Corporate Income Tax (CIT).

Please refer to the tax tables below, but bear in mind that these tables should not be used if you are seeking legal tax advice. 

 

Tax Brackets 

The following tax tables can be used by individuals for the tax years 2021 and 2022. Please note that individuals are only obliged to pay income tax if their total annual income exceeds a specific threshold, as indicated below.

 

For the 2022 tax year (1 March 2021 – 28 February 2022):

​Taxable income (ZAR) ​Rates of tax 
1 – 216 200 18% of taxable income
216 201 – 337 800 38 916 + 26% of taxable income above 216 200
337 801 – 467 500 70 532 + 31% of taxable income above 337 800
467 501 – 613 600 110 739 + 36% of taxable income above 467 500
613 601 – 782 200 163 335 + 39% of taxable income above 613 600
782 201 – 1 656 600 229 089  + 41% of taxable income above 782 200
1 656 601 and above 587 593 + 45% of taxable income above 1 656 600

   

Tax thresholds for individuals

Age 2022 2021
Under 65 R87 300 R83 100
65 and older R135 150 R128 650
75 and older R151 100 R143 850

 

Tax rates for Small Business Corporations (SBCs):

(Financial years ending on any date between 1 April 2021 and 31 March 2022)

​Taxable Income (R) ​Rate of Tax (R)
1 – 87 300 ​0% of taxable income
​87 301 – 365 000 ​7% of taxable income above 87 300
​365 001 – 550 000 ​19 439 + 21% of taxable income above 365 000
​550 001 and above ​58 289 + 28% of the amount above 550 000

 

Tax rates for Trusts:

Year of assessment ​Rate of Tax
​1 March 2021 – 28 February 2022 ​45%
​1 March 2020 – 28 February 2021 ​45%

 

Tax exemptions

​2022 ​2021​
​Persons younger than 65 ​R23 800​ ​R23 800
​Persons 65 and older ​R34 500 ​R34 500

 

Conclusion

Forex trading creates exciting investment opportunities and a reliable source of income for many South African citizens, but it is classified as a legal income-generating activity and income tax is payable to SARS. 

Always make sure that your annual tax returns are submitted on time to avoid penalties and use this guide to understand why Forex Trading is Taxable in SA.