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Are you racking up trading profits? SARS will want its cut…

by , 24 July 2015

If you invest and you trade, SARS view the returns you make from these activities differently.

Say you have a long-term investment portfolio. If your profits from selling shares within a tax year exceeds your capital gains threshold, you'll have to pay capital gains tax on a portion of your profits.

But if you're a trader, SARS views the profits you make as income rather than capital gains.

Let's take a closer look…

What makes you a trader in SARS’ book?

If you’re a trader, chances are your trades will be short-term in nature. A typical trade may last between a day to a few months.

If you trade with the intention of making money from your buying and selling trading activities, SARS classes your profits as income.

This means you’ll have to pay income tax on your gains.

How to declare your trading income

When you complete your annual tax return, the net income your make (your profits minus your losses) should be included as other income.

This means you’ll pay income tax according to your tax bracket on your trading profits.

If you trade a lot and do it well, the income you make from trading could push you into a higher income tax bracket.

If you trade for the short-term and invest for the long-term, you need to keep records of these different transactions. If you have separate trading and investment accounts, you’ll find this easier to manage.

It’s a good idea to discuss this with your financial advisor, tax specialist or accountant when it’s time to file your annual tax return. SARS could view your non declaration of profits as tax evasion and this comes with some hefty penalties.

So there you have it. Why SARS will want its cut if you’re racking up trading profits.

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Are you racking up trading profits? SARS will want its cut…
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