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futures tax rate in Canada?


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futures tax rate in Canada?

  #21 (permalink)
 boxi 
Toronto, Canada
 
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boxi View Post
Yes, only half of capital gains are taxed in Canada.

I'm looking deeper into it and it looks like the day traders don't get the 50% capital gains benefit. More in the link:
TaxTips.ca - Tax treatment of investments - capital or income?

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  #22 (permalink)
 boxi 
Toronto, Canada
 
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JustinIsHere View Post
The following is applicable for Quebec residents:

9. Generally speaking, a capital gain or loss results from the disposition of commodity futures that are not connected with the taxpayer’s business and not acquired on a commercial basis. This may be the case, for example, where commodity futures are acquired to offset the effects of currency devaluation in order to protect the value of long-term investments or non-liquid investments.

Source: https://www.publicationsduquebec.gouv.qc.ca/fileadmin/produits_en_ligne/Fiscalite/pdf/I3A80T2R2BULB.pdf

So basically, if you trade futures and never take delivery upon contract expiration (no commercial hedging, no intention to use the commodity itself etc), then your gains are considered capital gains, so only 50% is taxable at the provincial level.

Note that the file is an interpretation, dated June 30, 2008. Ask your accountant or tax adviser to be sure.

I'm still not sure how it works for index and bonds futures though.

These articles talk about commodity futures, so if you are trading CL maybe it applies. But does if apply when trading ES, NQ or index futures?

Also, in my previous post I posted a link about the day traders, so the capital gain may not apply.

All this is not clear to me, a lot depends on interpretation. If somebody has some definite rules for taxes on Futures trading and capital gain post it here.

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  #23 (permalink)
 grausch 
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Not an expert in Canadian tax, but am an expert in South African tax which typically refers to UK case law. Due to the link between Canada and UK, I am assuming that the Canadian tax law draws heavily from the UK tax law.

If that is the case, then the following applies:
1. If you apply a lot of your time to the buying and selling of futures, then it will most likely be considered your business and be taxed as income. The typical case law in the UK stated that betting on horses is a capital gain, but developing a system to bet on horses transforms that into income.

2. The Guidelines for Quebec in the above link state the following: "8. However, none of the above-mentioned factors is itself determinative. All of the facts and circumstances surrounding the transactions must be considered." This means that each case will be considered individually on its own merits. That is done intentionally so that the tax authorities are not boxed in. The guidelines seem to apply more to business who wish to hedge a certain risk.

Based on the above, day-traders and swing traders will have their income taxed as income and not capital gains. In the UK and South Africa that would definitely be the case.

Based just on the Guidelines, even longer term traders my find that their income is taxed as income. This is where paragraph 8 quoted above may come into play.

Commodities and index futures will generally also be treated the same since the underlying principle is whether or not you are trading as a business or not.

Now all of this could be entirely wrong and your best bet would be to talk to a CA friend if you have one. Other option would be to consult with a tax advisor. However, my gut feeling says it will be income.

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  #24 (permalink)
 Underexposed 
Calgary Alberta/Canada
 
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trendisyourfriend View Post
That's correct. Day trading is considered the same as if you were being an autonomous worker or independent contractor. However, if you trade the stock markets within a TFSA (tax free savings account) then it is different. A TFSA is a registered account that allows you to earn capital gains and dividends tax free. Your contributions are not tax-deductible, but you won’t be taxed or penalized for any gains even when you withdraw them. If you let your money sit idle in a low-interest TFSA, your gains will be minimal, meaning there’s not much tax free about it. However, if you pro-actively invest your money and your gains are more significant, then the TFSA is actually working.

This is changing a bit according to this article

Canadians with too many wins in their TFSA are being targetted by CRA | Financial Post

It looks like CRA is being watchful about individuals that make a lot of money in their TFSA. When I say a lot of money it seems that they are talking about several 6 figures and growing. They are being forced to pay taxes on this money gain.

I have been quite successful in my own TFSA having doubled it in the last 5 years but my stocks are held for minimum of 3-6 months and are high paying dividend stocks. So I think I won't attract attention but seeing this article is worrisome.

The TFSA is the only thing that the Harper government has introduced that I like. But speculators that abuse this product scare me sometimes.

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  #25 (permalink)
 JustinIsHere 
Montreal, Canada
 
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Underexposed View Post
This is changing a bit according to this article

Canadians with too many wins in their TFSA are being targetted by CRA | Financial Post

It looks like CRA is being watchful about individuals that make a lot of money in their TFSA. When I say a lot of money it seems that they are talking about several 6 figures and growing. They are being forced to pay taxes on this money gain.

I have been quite successful in my own TFSA having doubled it in the last 5 years but my stocks are held for minimum of 3-6 months and are high paying dividend stocks. So I think I won't attract attention but seeing this article is worrisome.

The TFSA is the only thing that the Harper government has introduced that I like. But speculators that abuse this product scare me sometimes.

The guy who got caught was an investment advisor and was expecting to not get flagged as a professional trader? SMH. That's cocky.

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  #26 (permalink)
 
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 trendisyourfriend 
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Harper is thinking about increasing the max contribution to our TFSA to 11000$/year if i remember. That's a terrific vehicle for us, beeing able to make money without beeing taxed. I can't complain. Obviously, it is not for day traders but perfect for swing trading. Thanks for the link.

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  #27 (permalink)
 
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 Blue Eagle 
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Apologies for a question that is off topic but I haven't seen any threads closer to my needs. I am Canadian and have just started trading futures live. I am curious if anyone knows of a simple way to track trades for accounting purposes. I run a business and asked my accountant about it and she said I need to track every trade and also do some calculations on exchange rate daily (as I fund in Canadian dollars but through IB trade in US dollars). She said it is quite extensive which has caused me some grief. I am making 3-10 trades a day for a few contracts each so not a ton but I don't really want to have to go thru and enter each into a spread sheet every single day.
Any thoughts or solutions would be appreciated.

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  #28 (permalink)
 
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 deaddog 
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Blue Eagle View Post
Apologies for a question that is off topic but I haven't seen any threads closer to my needs. I am Canadian and have just started trading futures live. I am curious if anyone knows of a simple way to track trades for accounting purposes. I run a business and asked my accountant about it and she said I need to track every trade and also do some calculations on exchange rate daily (as I fund in Canadian dollars but through IB trade in US dollars). She said it is quite extensive which has caused me some grief. I am making 3-10 trades a day for a few contracts each so not a ton but I don't really want to have to go thru and enter each into a spread sheet every single day.
Any thoughts or solutions would be appreciated.

A simple spreadsheet should suffice.

As far as exchange rates: CRA will be OK with a monthly average rate or even a yearly average rate as long as you use the same method each year.

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  #29 (permalink)
 
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 Blue Eagle 
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deaddog View Post
A simple spreadsheet should suffice.

As far as exchange rates: CRA will be OK with a monthly average rate or even a yearly average rate as long as you use the same method each year.

And this is a method you have used with CRA? How many years, if I can ask? They have never had any concerns?
And lastly, do you use an accountant or do it yourself...ie does a tax professional agree with this method?
Sorry for the further questions but want to get it right from the start as I have had big time CRA issues before.
Thank you for any further info you may have....

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  #30 (permalink)
 
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 deaddog 
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Blue Eagle View Post
And this is a method you have used with CRA? How many years, if I can ask? They have never had any concerns?
And lastly, do you use an accountant or do it yourself...ie does a tax professional agree with this method?
Sorry for the further questions but want to get it right from the start as I have had big time CRA issues before.
Thank you for any further info you may have....

I use the monthly average from the Bank of Canada web site. Have been doing this for last 20 some odd years. Ever since IB opened shop in Canada.

I do my own taxes. I have not been audited but have been re-assessed on several occasions for missed T slip info.

I keep a very detailed paper trail on all my trades. I have a spreadsheet that has all my trading info that I cross check with whatever T slips I get from my various brokers.

Somewhere on the CRA web site they give the options for reporting exchange. If your accountant doesn't know the rules you should maybe change accountants.

I no longer day trade futures or stocks. I now trade long term, stocks only, and spend maybe 10 minutes a day manageing my portfolio.

"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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Last Updated on December 20, 2021


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