Tax on CFD

In most countries CFD s are not subject to CGT or Stamp Duty if you are trading as a business or regularly enough as a private trader; it is treated as part of that business activities (gains and loses) and it is not eligible for CGT.

CFD s can also be treated as an investment if you are not carrying on a trading business; and as in any other investment, you will have to pay capital gain or loss with your CFD trading.

Once it is determine how are CFD s used – as an investment or as a trading business like activity – then you can include it into your tax return. Notice that it is important to understant that not matter how you use CFDs, it isn’t a separate tax, it is include as part of your income tax.

Including your CFDs into your tax return it is straight forward business, all what you have to do, is to give to your accountant  your inicial capital and the balance at the end of the financial year. See sample below.

CFDs from 01/07/2010 to 30/06/2011 Initial Capital as 01.07.2010 Transfer in to CFDs Acc Transfer out of CFDs Acc Balance as 30.06.2011
$20 000 $5000 $18 000 $16000

Other wise, if you are doing it yourself, just have to put down your profit or loss for the year like you would do normally with any capital gain and indicate the calculation method (indexation, discount or other method).

In some countries if you do spread trading you could be exempt from capital gains and/or stamp duty. It is useful to check with an accountant.

CFD can also be exempt from CGT and Stamp Duty if you do CFD for recreational gambling – in which case any profit on the CFD is tax-free. But you have to justified by doing it as a pure gambling, by chance, without any financial knowledge  or preconceive financial decision.

Related Documents

http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID200757/00001
http://law.ato.gov.au/atolaw/view.htm?docid=AID/AID200756/00001
http://www.cra-arc.gc.ca/E/pub/tg/rc4268/rc4268-08e.pdf
http://www.asx.com.au/documents/resources/taxation_of_cfds_nov_2010.pdf
http://www.hmrc.gov.uk/manuals/cfmmanual/cfm13000.htm
http://www.ird.gov.hk/eng/pdf/e_dipn43.pdf

Risk warning: Your capital may be at risk. CFD trading is suitable for experienced traders and not beginners.