Tax on Forex Trading in South Africa – Understanding Your Obligations

South Africa recognizes Forex trading as a legitimate activity, and the South African Revenue Services (SARS) requires South African residents to pay taxes on Forex trading profits. In short, all South African residents must declare their Forex profits for tax purposes, and there is no getting around it. Like most nations’ revenue-collecting services, SARS will impose penalties for not paying taxes.

Let’s look at how SARS taxes Forex trading and explore some tax planning strategies that Forex traders can use.

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How Are Forex Trading Profits Taxed in South Africa?

Forex trading profits are subject to regular income tax rates in South Africa (unless an individual has set up a company for their Forex trading). Taxpayers can deduct trading-related expenses (e.g., computer equipment, trading courses, software, etc.) from their Forex profits to reduce their taxable income.

SARS publishes the applicable “tax rates for individuals” here on its website. Individual tax rates are a progressive system with higher percentages at higher income levels. The lowest tax rate is 18%, and the highest is 45% above a specified income level. Each year, SARS adjusts the income levels for each percentage income tax rate.

The Provisional Tax payment system applies to Forex trading profits because trading is not a salaried activity under the Pay As You Earn (PAYE) tax-paying system. Let’s examine how the Provisional Tax system works.

What Is Provisional Tax?

Forex trading gains are subject to the SARS “provisional tax” payment method.

Although “provisional tax” sounds like a separate tax type, like income tax, or inheritance tax it is not. Instead, it is a method of spreading tax payments to SARS over the year instead of in one annual lump sum at the end of the tax year. SARS uses the provisional tax payment system to even out cash flow for taxpayers, rather than facing them with a large single payment at the end of the year that they potentially cannot meet. The provisional tax requires taxpayers to pay at least two amounts in advance during the assessment year based on estimated taxable income.

How Do the Provisional Tax Payments Work?

1. The South African Tax Year runs from March 1 to February 28 the following year (or February 29 if it is a leap year). The tax year is named for the year it ends. For example, the tax year from March 1, 2024, to February 28, 2025, is called the 2025 tax year.
2. Provisional taxpayers must submit two provisional tax returns (IRP6) with any necessary payments to SARS during the tax year.
3. The first payment for the tax year must be made by the end of August (mid-tax year).
4. A second payment for the end-of-tax-year must be made by the end of February.
5. If the amount paid in previous payments was insufficient, the taxpayer can make a third top-up payment at the end of September (seven months after the tax year closes).
6. The “Estimated taxable income” that the provincial tax return requires is all your (non-PAYE) income minus business-related expenses incurred in earning that income. Also, subtract any pension fund, retirement annuity fund contributions, donation deductions, and exempt income.
7. If the first and second payments result in an overpayment, SARS will issue a refund (this happens when a taxpayer submits the ITR12 to SARS for assessment).

Provisional tax registrants must submit the IRP6 even if there is zero payment. Provisional taxpayers must also submit an ITR12 tax return (just like regular/non-provisional taxpayers). The due date for an ITR12 for provisional taxpayers is approximately 23 January the following year.

Late and underpayments result in SARS charging interest and other penalties, which depend on the scale of the missed payments.

Do I Still Pay Taxes If I Use a Foreign Broker?

All Forex traders who are South African residents must pay income tax on their trading gains when they start Forex trading in South Africa. It does not matter if they used a domestic broker holding the assets in South Africa or a foreign broker holding client deposits abroad.

South Africa has a residence-based tax system, meaning that SARS taxes residents on their worldwide income regardless of where it was earned. It does not matter where the resident earned their income. (In contrast, non-resident South Africans pay income tax only on their income from South African sources.)

Can I Avoid Tax on Forex Trading in South Africa?

The simple answer is: No, South African residents must pay taxes on their Forex profits. Because traders are not salaried with a Pay As You Earn (PAYE) taxation schedule, they must register for provisional tax (i.e., make at least two tax payments annually).

However, there are legal ways for Forex traders to pay less tax. Let’s explore some of them.

Tax Planning Strategies for Forex Traders in South Africa

1. The easiest and most common way for Forex traders to reduce income tax is to deduct expenses. Keep records of trading-related costs, as these are tax-deductible, meaning you can subtract them from your income before calculating income tax. Types of trading-related expenses commonly include:
   • Trading courses and books
   • Charting software like TradingView
   • Computer equipment: Remember to include anything you buy, such as new monitors, upgraded keyboards and mice, special cables, external speakers, etc.
   • Office-related costs, e.g., office furniture
   • Internet connection
   • Travel, e.g., to a seminar or even meeting another trader for networking
2. Consider putting a portion of Forex profits into a Retirement Annuity (RA) fund. Contributions to an RA are tax-deductible, effectively reducing your taxable income in the year you contribute. Remember, there is a percentage limit and dollar maximum (currently 27.5% and R350,000 a year) on how much you can place in an RA each year. There are also rules for when and how much you can withdraw from your RA, for example, the minimum withdrawal age being 55 years old (with some exceptions, such as small deposits).
3. Consider putting a portion of Forex profits into a Tax-Free Savings Account (TFSA). These accounts allow investments to grow tax free, e.g., free of tax on interest or capital gains. Unlike RAs, TFSA contributions are not tax-deductible, so simply putting money into a TFSA does not change how much income tax you pay. However, individuals can withdraw money from TFSA at any time without restrictions. Similar to TFSAs, there are limits to how much individuals can contribute. The current annual contribution limit is R36,000 per tax year, and a lifetime limit of R500,000.

My Take

All South African residents engaged in Forex trading for themselves must pay income tax on their profits and less trading-related expenses. It does not matter if you use a domestic or foreign broker, as SARS taxes South African residents equally on their worldwide income. One of the best ways to reduce taxable income for trading is to keep track of all expenses to deduct from profits before the final income tax calculation. Expenses include trading courses, books, computer equipment, charting software, internet connection, office furniture, etc. Forex traders must register for SARS’ provisional tax payment method, which requires at least two tax returns (IRP6) and any necessary payments at the end of August and February of the tax assessment year, plus a third payment if there is still tax owing. Forex traders must also submit an IRT12 tax return for the total assessment year. Late or underpayment results in interest and fines. Always declare and pay taxes! Lastly, South Africans can also contribute a portion of their income to a Retirement Annuity (RA) fund to reduce their taxable income.