Taxation of Day Traders [Forex, Crypto, Stocks - Can You avoid Tax?]

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Today I'm going to discuss something that I've been getting quite a few inquiries about, which is the subject of Taxation for Day Traders or Swing Traders.
If you're trading stocks, forex, crypto, commodities, etc this is relevant to you.
We are going to talk about the ways you can be taxed, and based on that how should you structure yourself so you pay the least legal amount of tax possible.
A few days ago a friend of mine who's a professional forex day trader reached out to me and said how people in their position do not need to pay any taxes in the UK because day trading can be considered gambling therefore different rules apply. At the first glance this sounds impossible, but let me explain in more detail.
When we look at trading we can look at three things:
1. Are you a speculator? This would basically be gambling
2. Are you an investor?
3. Are you somebody who is doing a business or a profession?
These are the three categories that traders can fall into, and the tax treatment CAN be different depending on which one you're in.
If you're doing Forex trading in the UK, something that's called spread betting, that is considered as a bet, as opposed to if you're using CFDs which are considered assets. If you're doing CFDs you're taxable and if you're doing spread betting you are not taxable.
However, if you're doing spread betting as a profession or business you can still be taxable because it is considered business income.
Taxation all over the world will depend on whether you're making capital gains or not. If you're an investor you're buying and holding the asset longer period of time. In some countries, there's a rule that if you hold for a year it is considered capital gains. If you're a trader you generally hold assets much shorter.
Many countries will tax passive income or capital gains in unfavorable ways, so this is something to be careful about. This will vary from country to country. Some will not tax you on your passive income from abroad (Malta or Cyprus) and some will.
However, it is still important to keep in mind that if day trading is your profession almost all of these countries will be considering your income as earned income. You can still work around this with an international company structure.
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Author: Michael Rosmer
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[@RoseSmith-v7g]

I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.

[@Elliot-Ivan]

I feel your pain mate, as a fellow retiree, I’d suggest you look into passive index fund investing and learn some more. For me, I had my share of ups and downs when I first started looking for a consistent passive income so I hired an expert advisor for aid, and following her advice, I poured $30k in value stocks and digital assets, Up to 200k so far and pretty sure I'm ready for whatever comes.

[@RoseSmith-v7g]

@@Elliot-Ivan That's actually quite impressive, I could use some Info on your FA, I am looking to make a change on my finances this year as well

[@Elliot-Ivan]

@@RoseSmith-v7g My advisor is VICTORIA CARMEN SANTAELLA;

[@Elliot-Ivan]

You can look her up online

[@VioletJessica-]

@@Elliot-Ivan The crazy part is that those advisors are probably outperforming the market and raising good returns but some are charging fees over fees that drain your portfolio. Is this the case with yours too?

[@wagmi614]

We need an updated video on this it's been a while!

[@frederikbachmortensen2596]

Agreed

[@baldwinzvapano3045]

Agreed

[@infiad1275]

Agreed. Please Michael. 😀😁😄

[@leocrespo2]

Fast forward to 2:14 for the actual content of the video

[@villageintheshire]

Thank you Michael. I think you could spent an hour on this topic of traders with a white board presentation (specific to day traders) and if you are able to further demystify this subject, you would be the first on the internet to do so. There is literally nothing out there which encapsulates this subject.

[@FrozenSkyy]

Great idea! @Offshorecitizen this would be very useful indeed for active futures/Forex day traders.

[@marcoperrott8160]

Keep up the great content mate!

[@ControlTheGuh]

Finally! Been waiting for this. Good stuff 👍

[@MichaelRosmer]

Glad you liked it!

[@trayomari7801]

First time checking out channel and you were great! Keep going my dude✨

[@OffshoreCitizen]

Thank you, Tray! What kind of content are you most interested in?

[@billhennessey6374]

While this is not applicable to me, this is a fascinating presentation, Michael. Thanks as always for the great content.

[@michaelgreen5515]

Great content as always. Correct betting in not taxed in the UK so good for poker players.

[@dorenestewart5084]

I just sold a property in Portland and I'm thinking of putting the cash in stocks, I know everyone is saying it's ripe enough, but Is this a good time to buy stocks? How long until a full recovery? How are other people in the same market raking in over $200k gains with months, I'm really just confused at this point.

[@dorenestewart5084]

@PaulinaLesniewska6 It all depends on how long you're willing to hold for, stocks might likely tank further, but making serious gains in this downtrend wouldn't be a problem if you're a pro.

[@dorenestewart5084]

@PaulinaLesniewska6 Hi, please who is the expert assisting you and how do I reach out to them?

[@jasenmiller1914]

Warning! 99.99% of these people willing to “disclose their trading secrets” are frauds - trying to charge you a fee to learn when in actuality they are losing traders who rent high-end cars and real estate - AND WILL NEVER DISCLOSE THEIR PROFIT LOSS STATEMENTS. BUYER BEWARE!!!

[@TimCoulter]

A fabulous, clear and detailed explanation, as always. Very enlightening!

[@OffshoreCitizen]

Thank you for the kind words! We appreciate the support!

[@FighterFred]

What was your advice to the Swede? Offshore on Malta, residency where income tax is low? That precludes Sweden btw.

[@kevinjpb1626]

Indeed, it would be wonderful if we could get an update on this video and regarding Cyprus and Bulgaria. Really, 0% personal tax in Cyprus on stock and (index) futures trading under non-dom? Or is it considered regular income and need to pay personal tax?

[@jensg.7553]

Thanks Michael, good video. With regard to spread-betting in the UK, it should also be noted that trading for this must take place on a spread-betting account which not only reduces the choice of brokers enormously but also comes at the expense of competition in trading fees. Especially for successful traders with high trading volumes, who can get significant commission discounts from professional FX brokers, spread-betting is often no longer an option, because SB brokers with competitive prices have virtually died out. It has become a pure retail market with the usual high trading costs there. If I had to pay 60 instead of 20 per million traded (round term), I would also have to take that into account with any tax planning, because the tax at least only accrues on the total profit and does not, like the commission, make profits smaller and losses larger.

[@OffshoreCitizen]

Very good points thanks for adding those details

[@galaxydmello2570]

can you suggest a list of countries suitable for day traders?

[@tofudeliverygt86]

Thanks for a great video!

[@OffshoreCitizen]

Always a pleasure! Anything you'd like to see next?

[@leocrespo2]

Great video thanks

[@thefirstassistant5062]

Hello sir. I have a question. What if u r using a broker that doesn't accept US residents and u r one of them but u r using it somehow!. When it comes to taxes is that can be a problem paying them?. Thanks

[@tinglestingles]

I told my accountant I'm a dirty crypto speculator in 2017 - he said "It's a total lottery". His view has now changed. You said FOREX - does that apply to crypto too?

[@venusreena2532]

Is Interactive Brokers still the better choice ?

[@jape0140]

Thanks for the video, if you a are a day trader, would it be possible just to get a residency (by getting a freelance license) in the UAE and be considered their resident for all tax purposes or are there any problems with this? thanks.

[@TkSebastian]

Setting up a company and trading would be more ideal I think

[@coisadealemao2565]

Would be something like this applicable to Germany as well?

[@harukakanata9408]

Great video! I have a quick question. When I make millions on crypto😂, I plan to go to Malaysia and get MM2H retirement visa. I read somewhere that if I try to cash big amount at the bank, they would consider me a trader and could be taxed up to 30%. Any suggestion?

[@SW-ex3zf]

Can you do a video on how to reduce your withholding tax rate on dividends or how to structure to reduce this type of tax regardless of where you live? It's really annoying if you live in a country with no double taxation agreement with the US as the broker defaults to deducting the maximum of 30% of any dividends received.

[@emailevaluation6626]

Would love to see a video for the dividend investor, too.

[@kyler565]

Please elaborate. they take 30% of dividends because it's a US company paying the dividends or is the reason it's on a US listed exchange or because it's a US broker

[@venusreena2532]

What broker deducts taxes?..

[@MrArtVein]

Mauritius

[@empirenft2349]

Can I do option 3. .. to minimise taxes...from Australia..thx mate..

[@fumonshow87]

The difference between speculator and trader seems like an important detail. Since US OTC stop signs, caveat emptors and pink sheets are considered extremely risky, could anyone who buys them for more than 1 day and less than 1 year be considered a speculator? And speculators are taxed like gamblers? Also, what is the time frame to be considered an investor? Everyone says "holding for a longer period". What's that period? Can you be considered an investor with a portfolio of OTC stop sign/caveat emptor? If I'm red with an otc stock for, let's say 10 years, and then it goes green, was is considered an investment according to legal authorities? If someone outside the US, let's say Canada, makes a profit with US OTC stocks, is it considered a foreign income? Thanks.

[@OffshoreCitizen]

Varies by country but usually over a year is considered long term. As for being considered foreign income, foreign to who? If you're a Canadian then your stock investments are typically considered Canadian income regardless of the exchange. That's not true of all countries though.

[@allinbushe9309]

what about futures ? can i open an individual acc in guernsey?

[@stefanuswardoyo]

Hi Michael, in the solution of structure International Company, you have mention “if you have enough scale”…. May you describe further, how much the “enough scale” you are refer ? Hundreds ? Million ?

[@OffshoreCitizen]

Usually depends on the tax you're paying usually as your tax bill gets into the 6 figures and beyond depending on the operation

[@KetanSingh]

Any update to this year?

[@Gorilladome4664]

Michael, or anyone quick question....anyone have experience in moving a stock portfolio from say Canada, North America....offshore to an overseas broker, 'in kind' without having to liquidate your stocks into cash, wire...re purchase etc....I can do this locally within Canada between the different brokers, but international? Thanx!!!!

[@zackeryzackery9381]

Great advice.

[@OffshoreCitizen]

Happy to be of service ☺ Anything else you'd like to see?

[@allitm4642]

Awesome video!! Next video how Canadians can move to Malta or somewhere else if their sole income is from Day Trading? Thanks 👍🙏

[@20775046]

This!!! I gotta find a way to do this

[@allitm4642]

@@20775046 You're a Full Time Day Trader in Canada?

[@Kaqqie]

most countries, if not all have a time rule, where you have to spend a certain number of days within their borders for your income to be taxable. what happens if you never stay long enough in a country for your income to be taxable, can you avoid paying taxes this way?

[@OffshoreCitizen]

We've actually made a video on that topic :) Check it out and let us know what you think kzbin.info/www/bejne/rHvZkKOlnduMoZY

[@blissful_co2139]

Was wondering if setting up an LLP in the uk , with one sole trader and one offshore llc as partners, and sole trader just spending offshore capital as living expenses is possible?

[@OffshoreCitizen]

Depends on your residency and citizenship, best is to book a call to discuss

[@lucai.5850]

Thanks Michael great video as always, I am a resident in Malta so I can take advantage of zero capital gain but for asset protection I would like to open a US LLC and invest and trade the capital through the LLC. Would the US consider those capital gains as US Income? and could I report the llc cacao Ut gains as capital gains in Malta to take advantage of the zero tax? Thanks in advance

[@OffshoreCitizen]

Probably not but we'd need to look at specifics

[@lucai.5850]

@@OffshoreCitizen thanks so probably not to both questions?

[@nickstyles2943]

Can I be the director for the offshore entity and then employed as a contractor onshore. Or will I need a nominee for the offshore entity as a layer of protection? (I'm based in the UK) Thanks for demystifying this topic.

[@pd1648]

Interesting - Director and shareholder of offshore company (say in Cyprus) employing a contractor who has right to work in UK - needs thought re IR35 etc

[@sshetty9683]

For traders like me open llc in us for non us reaidents and be resident where foreign income is not taxed. Yes Rosmer right?

[@MichaelRosmer]

This is tricky because you can get caught on the corporate residency rules (company not resident where it is registered), the CFC rules or even the source income rules so definitely not so straight forward but possible in some places.

[@FrozenSkyy]

​@@MichaelRosmer Interesting Mike. Could one do this in Cyprus? I.e. live in Cyprus as a Non Dom, set up a US LLC and trade futures & Forex through that LLC. Gains can be paid out as dividends to my individual name. Wonder if Cyprus will treat the LLC as deemed to be resident in Cyprus, if I'm the sole shareholder and controller?

[@MichaelRosmer]

@@FrozenSkyy in Cyprus sale of securities including trading isn't taxes 3 anyway. There's some people who will argue this should be earned income but no such limitation exists in law and our inquiries with the tax department have been that no such limitation exists with holding time etc. As for the US LLC yes technically they'd consider it resident in Cyprus based on management & control or could even argue it's local income based on a permanent establishment in Cyprus though in practice Cyprus is not so aggressive in how they pursue those things

[@FrozenSkyy]

@@MichaelRosmer This is excellent Michael! So basically one can live in Cyprus, day trade directly in one's individual name, and have all the profits tax free. Beautiful. In my research - I came across feedback that this situation would apply only if one trades Futures contracts, but if I trade Forex - then those gains will be taxed in Cyprus. Have you heard anything similar? or is Forex trading tax free too? FYI, I trade Currency Futures on the CME exchange right now, and may look to switch to trading Forex on the LMAX exchange (as I keep scaling up).

[@mael272]

In Brasil we to pay 15% per month.

[@Mellow4202]

The thing id like to know is if i lose money, do i still pay tax on the capital that was lost? So, hypothetically speaking if i had deposited 1,000 to an account and then flipped the account to 2,000 but lose 300, do i still have to pay tax on the whole 2,000 since i technically made income before i lost some of it. Or do you only pay on the 1,700.

[@TravelerJerryLee]

All tax are paid on the net gain/loss, again depends on your specific location and tax law.

[@tbetical]

What is you live in a state that dont have taxes like Florida..? Do you still pay taxes on forex trading...?

[@OffshoreCitizen]

Yes that's just state tax that doesn't exist you still have the federal tax, which is the higher of the two

[@henrikjohansson4555]

my understanding is that its capital gains tax in Portugal for public stocks even with the NHR ? (28%) Only Dividends income would be tax-free.

[@RomilCPatel]

Yes, but you could buy stocks under a corporation, then sell them when it price is higher, finally when you want to pay yourself, you just distribute it as a dividend from the corporation. This can be done zero tax if the local corporate tax rate is zero and the jurisdiction isn’t blacklisted, like in Qatar.

[@henrikjohansson4555]

@@RomilCPatel well that’s a lot of costs and administration…

[@RomilCPatel]

@@henrikjohansson4555 True, but that’s the cost benefit analysis that has to be done in a specific situation. If your paying more than 10k a year through capital gains then it’s worth the extra cost of setting up the corporation, bank account(s), and brokerage account(s), and maintaining them.

[@henrikjohansson4555]

@@RomilCPatel agreed with principal but not cost definitely not worth it for 10 000, having a real structure in place with directions will cost you 15 000 a year at least and your own time you have to factor in also. And changes they can make Qatar sounds like high risk added to black list Cyprus not as high risk I go there. I say maybe if you have capital gain of 50 000 or more a year, assuming an turnover of 25-30% your what at like 1,5% cost of sum in effective tax using 28% capital gains tax? So your looking at a stock portfolio of around 4m maybe you think it’s more like 2m.

[@botubeful]

@@RomilCPatel How about CFC rules, how to get around that?

[@michaelstringcode7776]

Link to podcast in description please 🙏

[@OffshoreCitizen]

Added to pinned comments

[@gokusupersaiya8067]

may i know the flow of offshore tax? let say i have been tax offshore. if that money come to my country its will be tax? double tax?

[@OffshoreCitizen]

This will massively depend on your country of residence and your offshore tax structure. In some cases it’s more complicated than in others.

[@gokusupersaiya8067]

@@OffshoreCitizen my country dont have dual citizenship. if have dual citizenship, ill benefit from tax haven. if offshore tax dont double tax, its also help reduce tax burden. thank you, your channel really help me see big picture of tax game.

[@ChristianCohn]

Problem is the staking rewards at defi

[@OffshoreCitizen]

You mean in terms of the tax in those rewards?

[@justmyself2735]

Hi if im a german citiizen with residency in the UK, but moving to the UAE or saudi arabia, do i have to pay tax? IF so which country will tax me?

[@MichaelRosmer]

You are taxable where you are tax resident. So once you are out of the UK system you'll no longer be taxable there.

[@justmyself2735]

@@MichaelRosmer thank you so much

[@panos7256]

This would not work my dude. If you establish an offshore without living in the country of where the company is registrated then you need to establish economic substance in that country in order for the company to be considered tax resident of that country. For one man trading company, that is today difficult to achieve, unless you really hire local stuff who earn real salaries. Otherwise two things will happen: Firstly this company will be tax resident of the country you live as the effective management takes place where you live. Secondly, if you have not disclosed to the authorities this company and any income you have earned you will be charged with tax evasion. Ths structure with the offshore can legally work when your relocate to the country where the offshore is incorporated.

[@AIGenerated]

I thought that trading CFD was gambling considering how shady it is.

[@flyheli]

Lot of details...quite a complicated topic but there’s always a solution 🤑

[@OffshoreCitizen]

Absolutely!

[@TheSecurityAgency]

The advertizing ends at 2:30, it makes 23% of the 10min video. Didn't watch further maybe there is even more than that. First you give somthing and then asking for a return, no?

[@farmankhan2865]

Hei I am Farmanullah Qazi I want to withdraw $24,000 from my trading account so I have 54,000 in my account my broker said first pay $4000 tax after that he can withdraw this money but I don’t understand which tax so I don’t understand what can I do so I don’t know this is big problem for me but this is a big tax for me 24,000 I pay $4000 tax This is my trading account so Why I pay $4000 tax I don’t understand

[@tinglestingles]

Do we get a tour of your office in Bulgaria? Do you have some good views like 'another office' in Belgrade? If you know what I mean?? ; ))

[@MichaelRosmer]

😂😂

[@thierryvidal63]

With spread betting you are not on the market. You're trading against a private house. It is very unlikely that they'll let you take away millions from them. Yes, it's tax free but you'll lose and that'why HMRC doesn't bother with that.

[@rizwanakarizzy8771]

I’m from California. Yeah horrible tax situation. I’m going all in on stocks mainly and some Crypto. My goal is to get to 0 tax. I have been searching your videos. First I was thinking of moving to Texas or Florida to at least save on income tax, but federal corporate taxes still apply. So then I started watching your videos and came up with a plan. What if I incorporate in Virgin Island (no corporate tax) still have to show to US but live in a income tax free state like Texas or Florida. Can I do this?

[@OffshoreCitizen]

Unfortunately, it's not so simple there's a whole host of rules to prevent you from being able to do that. You can potentially get optimization but it depends on the facts of the situation.

[@rizwanakarizzy8771]

@@OffshoreCitizen so it’s better to just stay in US and pay the tax?

[@Omar-kt6in]

Puerto Rico 🇵🇷

[@RomilCPatel]

@@rizwanakarizzy8771 You could try and retain the earnings under the corporation. This way you don’t have to pay dividend taxes on it, but you can’t take the money out; if you do then you need to pay taxes.

[@smoothrelaxationmeditation7280]

i am sorry ,your video is more confusing ,not straight answer for your consultation .

[@K4MR4N1UK123]

Forex traders should not pay tax. The goverment only want to be a partner in your profits why not also share our losses then?

[@OffshoreCitizen]

Why should forex be any different from any other business?

[@sender5804]

@@OffshoreCitizen forex like sports betting is 0 sum game (minus commission). shouldn't be taxed and isn't in the UK but in some countries it is taxed

[@jasenmiller1914]

They do take a tax 101 class about deductions and corporate welfare.

[@raypack6869]

You wasting too much time than real subject