Is Forex taxed in South Africa and how do you pay it?

How Forex tax in South Africa is calculated and how do you pay it?

Currency trading in South Africa is a very popular activity. Financial trading is regulated by the Financial Sector Conduct Authority (FSCA) in the country. The FSCA oversees financial markets to ensure that everything is done legally and the investors’ interests are protected. 

South Africa has a vibrant entrepreneurial culture that contributes to the rise in interest in currency trading. In addition, Forex markets, information and education, and modern technology are widely accessible for the citizens of South Africa.

While Forex markets are highly accessible and there are strict regulations in place to protect the interests of investors, it should be mentioned that traders pay tax on Forex in South Africa. Let’s learn more about the tax rate on FX trading South Africa residents have to pay and how to pay the taxes.

FX trading tax South Africa residence have to face

In South Africa, income generated by currency trading is taxable. Forex trader tax South Africa residents pay depends on many factors. There are Capital Gains Tax (CGT) and Income Tax charged depending on whether you are a retail trader or an institutional trader. Institutional traders pay income tax, while retail traders are charged with CGT. Let’s take a look at the Forex tax calculator South Africa residents may find very useful. 

Capital Gains Tax

In case your currency trading activity is considered as capital gains, you will be charged using a progressive rate. The CGT rate in the country is determined based on your income bracket and age. The rates for retail traders are as follows:

For retail traders below the age of 65:

  • If their income is less than ZAR 87,300, there is no tax charged.
  • For income ranging from ZAR 87,301 to ZAR 365,000, there’s 18% tax rate. 
  • Individuals that earn above ZAR 365,001, are taxed at 26% rate.

For retail traders ager over 65 to 75:

  • There’s 0% tax rate if the income is below ZAR 135,150.
  • Income between ZAR 135,151 and ZAR 365,000 is taxed at 18% rate.
  • Earnings from Forex above ZAR 365,000 are taxed at 26%. 

For retail traders aged 75 or older:

  • There’s 0% tax rate when income is below ZAR 151,100.
  • 18% is charged when a trader makes between ZAR 151,101 and ZAR 365,000.
  • Individuals that make above ZAR 365,000 are taxed at 26% rates.

Income tax

Forex income tax South Africa residents face is charged when trading activity is classified as a business and as revenue (ordinary) income. The income tax can be applied to institutional traders working for commercial banks, investment banks, hedge funds, asset and wealth management companies, and so on. The tax rate is progressive, which means it depends on the level of income. In this case, the trader’s age is not a factor:

  • Traders that make up to ZAR 87,300, pay 0 tax.
  • Income of ZAR 87,301 to ZAR 189,880 is taxed at 18% rate.
  • Income range between ZAR 189,881 and ZAR 296,540 is taxed at 26% rate. 
  • Traders making between ZAR 296,541 and ZAR 410,460 are taxed at 31%.
  • 36% income tax is applied for profits ranging from ZAR 410,461 to ZAR 555,600.
  • Income between ZAR 555,601 and ZAR 708,310 is taxed at 39% rate.
  • Traders that make over ZAR 708,310 are taxed at 41% rate. 

It should be noted that these rates are set by the policy makers in South Africa and are subject to change. Taxation policies in the country are carried out by the South African Revenue Service (SARS). SARS tax on trading is similar when it comes to trading different asset classes. 

How to pay taxes online in South Africa

The South African Revenue Service revenue service offers an online platform called eFiling for making online taxation. The platform can be used to file tax returns and make payments electronically. In order to pay taxes online in South Africa, you simply need to follow these steps:

  • Register on the platform: For the registration, you need to visit the SARS eFiling website and register as an user. You will be required to provide your personal information, username and password during the registration process.
  • Log in to your eFiling account: after registering, you are free to use your password and username to log into your account.
  • Pick the relative tax form: Select the appropriate tax application form for the type of tax you need to pay. Remember that retail traders are taxed by the Capital Gains Tax (CGT).
  • Finalize your tax form: provide the required information on the tax form, including your personal information, and details about capital gains or any other relevant information.
  • Calculate your taxes: The eFiling platform will automatically calculate the tax amount based on the information that you have provided to the system.
  • Pay the taxes: eFiling platform gives its users the option to make deposits using various methods, such as credit and debit cards, online banking and electronic funds transfer (EFT).
  • Confirmation: Once you make the payment you will receive a confirmation of the payment. It is essential that you keep a record of this confirmation for your reference and future tax purposes. 

Key takeaways

To sum everything up, Forex trading is legal and regulated by the Financial Sector Conduct Authority (FSCA) in the country. Retail forex traders are taxed by Capital Gains Tax (CGT), while institutional traders are charged with regular income tax. In South Africa taxation is carried out by the South African Revenue Service (SARS). Capital gains tax is calculated by two metrics: the level of income of the trader and age. Income tax is applied to institutional traders that work for commercial banks, investment banks, hedge funds, asset and wealth management companies, and so on.

FAQs on Forex taxation in South Africa and how to pay taxes

What is the Forex tax rate in South Africa?

Forex profits tax in South Africa are charged by the Capital Gains Tax (CGT) and Income tax depending on whether you are trading individually or for a company. For individual and retail traders there’s a progressive tax rate, such as:

For retail traders below the age of 65:

  • If their income is less than ZAR 87,300, there is no tax charged.
  • For income ranging from ZAR 87,301 to ZAR 365,000, there’s 18% tax rate. 
  • Individuals that earn above ZAR 365,001, are taxed at 26% rate.

For retail traders ager over 65 to 75:

  • There’s 0% tax rate if the income is below ZAR 135,150.
  • Income between ZAR 135,151 and ZAR 365,000 is taxed at 18% rate.
  • Earnings from Forex above ZAR 365,000 are taxed at 26%. 

For retail traders aged 75 or older:

  • There’s 0% tax rate when income is below ZAR 151,100.
  • 18% is charged when a trader makes between ZAR 151,101 and ZAR 365,000.
  • Individuals that make above ZAR 365,000 are taxed at 26% rates.

Can you avoid paying Forex taxes in South Africa?

Finding ways to avoid tax on Forex trading in South Africa might be a bad idea as you may get penalized by the regulators. Hiding income or providing false information, is illegal in South Africa and can lead to serious consequences. It is also possible that SARS freeze Forex trader account, when illegal activity is detected. 

Do non residents pay Forex tax in South Africa?

No, non residents of South Africa cannot open trading accounts from the country as due to the anti money laundering laws, regulated brokers are unable to accept traders that are registering from a non resident country. During the registration process brokers typically ask traders to verify their trading accounts by uploading proof of identity and proof of residency. 

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