Taxation of incomes of traders of binary options, Forex and others (On the example of the Russian Federation)

Ted Capwell

It is quite difficult for a private investor today to understand the intricacies of tax legislation, which concerns the payment of taxes on income received as a result of trading or speculative operations in the currency fixed-term, stock market, or from income derived from trading derivative investment instruments. The problem in this case is not only the scarcity of information on this issue, but also in the direct absence of a specialized legal act that would completely regulate the activities of the private investor, especially in the online trade. So pay or not, and what threatens in the event of concealment of income to the online trader in Russia – these topics we will today devote an extensive material, which will analyze the main requirements of our legislation, as well as provide some recommendations that will open the opportunity to reduce possible tax payments to online traders of the financial market .

Today, in the private trading environment, two main trading tools are offered – urgent electronic contracts (binary options) and Forex – a speculative instrument for operations in the foreign exchange market. At once we will notice, that today disputes which are conducted in the professional environment about illegality of work, both in the urgent market, and in sphere FX are absolutely untenable. Simply put, you will not be exempted from taxes only because you, as a direct participant in the process, consider trading as a game or refer your activities to the sphere of the gaming business – we will return to this topic in the course of analyzing the legislation. So, how does the activity of private investors regulate the legislation in the main trading regimes?

Forex market – what does the law say?

Forex as an online trading tool appeared more than 20 years ago and its active development in online did not remain without the attention of the state. Of course, everything did not happen immediately, and many speak of a very late reaction of the regulatory bodies to this mass phenomenon. But we have what we have – today the legislation of Russia proposes as a regulation of legal relations in this area of ​​activity a specialized section of the law “On the securities market”, which must be analyzed in order to understand the intricacies of taxation.


Taxation of traderes ( binary options, forex )


So, the changes in the legal act created the prerequisites that allow to obtain sufficiently certain rules for the work of private investors in the financial market, and describe the rules of cooperation with dealing centers that offer this type of services. It should be noted that the changes have affected not only brokers, but also traders. What do we have in the end?

For brokers, the rules for entering the market and the list of sanctions for violations of the provisions of the law were prescribed:

• Work as an SRO for brokers begins with the payment of a contribution to the compensation fund – from 2 million rubles. These funds are subsequently channeled to payments to investors in the event of bankruptcy of market operators
• The broker must have its own financial capital – from 100 million rubles. In this way the regulator insures investors and directly the broker from financial problems
• The registration of a market operator must have Russian jurisdiction
• All trading assets of the company’s partners must be kept in the broker’s accounts with Russian banks. This is logical, especially considering the problem of the return of funds from traders from foreign banks
• The company should warn its customers about the risks of trading
• The resource of the operator should display information about the algorithm for calculating asset liquidity quotations, the text of the partnership agreement and other basic regulatory information
Undoubtedly, it allowed to put things in order in the sphere of currency trading. The law also established rules for investors who disclose the topic of our article – the taxation of incomes received from speculation in the foreign exchange market:
• Any trader when making a profit undertakes to pay 13% of tax deductions
• Market operators are recognized as tax agents, which allows them to deduct a tax payment from clients’ funds
• Brokers are required to reduce the maximum leverage to 1:50
• Investors are able to obtain legal protection under contracts with brokers

As you can see, legislators clearly and without alternative prescribed the issue of paying taxes on investment activities. But, as you know, everything is not easy, otherwise we would not raise this issue. Traders, cooperating with the operator, as before, face a lot of problems, including in the tax issue. Let’s see how the law works in real life.

Firstly, – despite the requirements of the legislators, most of the dealing centers still have offshore registration. Bypassing the law allows obtaining a license from the Central Bank and a variety of public regulatory organizations. In the end, we get a situation in which a broker can not act as a tax agent! Thus, automatic collection of taxes from each profitable transaction remains a myth and inaccessible mode of work of the investor in the market.

Secondly, – for a trader to honestly pay taxes, he must file a declaration. At first glance, everything is simple, if a small “but” – in order to prove the amount of profit, the investor must provide a certified copy of the income statement from his broker to the tax authority, which should indicate the reporting on all financial transactions on the market. Do you think the broker will give you such a document?

Thirdly, – the offshore jurisdiction of your operator does not exempt you from paying taxes! Yes, despite the problems with reporting and the lack of levers of influence on the DC, the state requires strict implementation of the law. Therefore, you will have to pay.

We will not scare you further with complicated legal concepts, but simply explain how everything happens in practice. Here you should immediately understand how you will pay tax on your profits.

1. You are fortunate and you trade transactions on the broker platform with the Russian jurisdiction. In this mode, you do not have to worry, because the operator will independently conduct all necessary calculations and penalties, and transfer funds to the budget on your behalf.
2. You, as a private trader, file an income tax return to the tax authority and pay taxes amounting to 13%. In this mode, despite the high tax rate, you get many distinct advantages. First, you will need to pay tax only on the amount that has passed through your bank account – note the banking, not the commercial one. There is a loophole here – trading assets are accounted for in the trading platform account, and unless you monetize them in a banking institution, they are not considered profit. An additional advantage in this respect is the possibility of monetizing profits on electronic payment services, which is offered by the bulk of brokers. So you can generally get away from tax payments. But remember that for dodging there is quite a serious responsibility right up to the criminal one.
3. You can register as an entrepreneur! In this mode, tax deductions are reduced to 6%. However, here you will be obliged to pay a mandatory contribution to the PF of Russia almost 28,000 rubles, and if your profit is above 300,000 rubles, an additional 1%. And, of course, you will need a bank account, which in this mode of operation requires paid service. Here it is also necessary to add complexity in reporting.

As you can see, the law provides many regimes and opportunities for paying mandatory payments to the budget. Let’s move on to the issue of paying taxes on binary trading.

Binary Options

In this direction of trading there was at first sight a double situation, which is connected with the legal circulation of binary options. The thing is that the Central Bank and other regulatory bodies do not yet recognize the asset as a legal instrument of trade. For this reason, many investors switched from forex to fixed-term contracts in the hope of avoiding the need to pay tax deductions from their activities. However, despite the absence of a special law, the legislator prescribed in the act, which we mentioned above, that taxes must be paid from trading derivatives, the list of which includes options (paragraph 2 of article 214). In addition, for those who still consider binary options bookmaker rate or a kind of casino, there is also a special paragraph 7 of Art. 214. Thus, binary options trading operations are fully covered by the law of the Russian Federation, which obliges investors of the derivatives market to pay tax deductions. All the rules and techniques in this case fully comply with the regime of taxation of the Forex market.

Let’s sum up the results

As you can see, despite the controversial moments of the work of financial trading tools and the lack of sufficient legislation in this matter, we, as law-abiding citizens, must pay taxes. Of course it’s up to each investor to choose how to spend or calculate the necessary payments. But in order not to flinch at every call on the phone or at the door of the apartment, it is better to pay the necessary funds. Undoubtedly, the legislation provides many opportunities for evading tax payments, but remember that the responsibility here can significantly exceed all the positive financial moments from the concealment of income. And finally, if you are not a system trader and your incomes are not stable or have a minimum figure of, say, no more than $ 200-300 per year, you will not be interesting to the tax authorities as an object of persecution.

Be a reasonable and law-abiding member of society, and do not seek to gamble with the state, it is easier to pay than to solve many problems later!


“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”