Do you pay tax on CFDs at XM as of December 2024?
It is something we don't like to think about, and might even forget when calculating trading positions, but you should be aware that indeed, CFDs are generally not tax-free. Here are a few things to keep in mind before we dive into the specifics:
- In most regions where CFD trading is legal, CFDs might be liable for capital gains tax, or even income tax.
- Regulations will vary by jurisdiction; consult an expert if you are unsure of the rules.
- Save all your trades and positions to make it easier when you have to declare your gains to the taxman.
- Always sign up with brokers that are regulated, and rest assured that BrokerChooser only lists brokers that are overseen by top-tier regulators.
- CFD trading is illegal in a small number of countries, such as the US, Belgium and Hong Kong, where the ban concerns local brokers.
Make sure you understand and are aware of the risks of CFD trading and know how to manage them.
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If you want to find out in detail about other brokers that offer CFDs, check out our top recommendations for the best online brokers for CFDs.
Tax implications on CFDs
When you get the rush of excitement from trading, you might forget that eventually the taxman might show up. Here, we will highlight the basics of what possible tax implications trading with CFDs might have in general depending on the jurisdiction where you are a tax resident. The main thing to keep in mind is that, despite potential similarities, tax rules differ from jurisdiction to jurisdiction, so we suggest checking with local tax authorities or a local tax expert any specific tax related question you might have. We are a broker comparison site, so we are not allowed to give you tax advice, but we can help you be aware of the tax implications CFD trading in general and for educational purposes.
Depending on the specific country where you are a tax resident, your profits can be subject to capital gains tax, and other trading-related taxes. In some countries, it can even be taxed as regular earnings under the local personal income tax schemes.
Keep in mind that CFD trading is currently banned in the US, and applies to both US citizens and residents and the rule is enforceable with both domestic and overseas brokerages. However, US-based brokers are free to offer CFDs to residents and citizens of other countries where CFD trading is allowed by regulators.
XM is a Cyprus broker which is regulated by the following authorities:
- EEA countries - Cyprus Securities and Exchange Commission (CySEC)
- Australia - Australian Securities and Investments Commission (ASIC)
- Rest of the world + EEA customers - Financial Services Commission of Belize (IFSC)
- Middle-East - Dubai Financial Servies Authority (DFSA)
First of all, we think that being regulated by a top-tier regulator is a great sign of safety. The broker can onboard you to any of its entities, which may be established and operating in different jurisdictions. If you are a tax resident in a country, where the broker has an established legal entity, it will likely onboard you to that entity, and you will likely pay taxes there.
Things to keep in mind generally:
- In most jurisdictions you will likely have to pay capital gains tax on your profits.
- You might be able to offset your losses against your gains.
- In some countries, your profit might count into your income tax too.
- Don't forget to check the dates when your tax return is due!
- Most importantly, reach out to a local tax expert to be sure of the rules!
What to do about taxes on CFD trading?
Here are a few things to keep in mind from a taxation perspective in any case when if you trade CFDs:
- Remember to keep track of all the instruments you're trading.
- Save your history of buy and sell dates, market entry and exit positions, it will help you calculate what you will need to pay on your profits.
- Save all your trading history, to be able to search any information quickly.
- Check tax rules before you start trading to be aware of the basic rules.
- Most importantly, seek professional help if you're unsure about your tax return, and leave ample time for doing your tax returns.
Looking for a CFD broker?
If you are looking for the brokers that offer the best CFD trading conditions, check our top recommendations of the best CFD brokers in the world.
Our expert team here at BrokerChooser specializes in helping you find a broker that best suits your needs. We have reviewed over 100 brokers based on BrokerChooser's unique methodology.
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Further reading
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Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.
