Is trading in binary options a game of chance or a financial product? Financial courts and tax offices have already had to deal with this question. The answer to the question is especially important for tax purposes. Because if binary options trading were gambling, the profit that traders would make would be subject to tax exemption. But how are binary options to be assessed? Do traders have to tax their profits from binary options? And how can the saver lump sum be claimed? In addition, we will inform you how losses from options trading are affected for tax purposes.
All important information at a glance
- deals with profits from stock transactions It is income.
- Capital income must be taxed.
- Binary options are futures on which the flat rate withholding tax of 25 percent is payable.
- For domestic brokers, the flat rate tax is paid directly to the tax office - this does not apply to companies domiciled abroad.
- Traders must tax their profits themselves with brokers abroad.
- Traders can claim the saver's lump sum on request.
Is there a tax liability on profits? BFH says yes!
Binary options are now a popular and widespread option in stock exchange trading to generate high profits within a short period of time with little effort. In addition, trading them is less complicated than trading stocks, commodities or indices. With binary options, investors only bet on falling or rising prices up to the defined expiry date. How binary options can be traded in detail and what options there are for trading is in our guide "What are Binary Options?"
If profits from securities transactions and financial trading are generated, these fall under income and must also be taxed according to the income tax law. Options and Binary options are generally considered futures, on the profits of which the flat tax introduced in 2009 must be paid, The flat rate withholding tax amounts to a flat 25 percent of the income generated. In addition, the solidarity surcharge, church tax, if applicable, or capital gains tax must be paid. The fact that binary options are not subject to tax exemption like gambling is due to the fact that traders with binary options intend to make regular profits. Therefore, also include binary options within the meaning of Section 23 of the Income Tax Act on futures, since entrepreneurial action can also be assumed for risky futures. The Federal Finance Court (BFH) had already confirmed this in its judgment of 1999.
Basically, the withholding tax is paid directly to the tax office by the respective bank or broker, However, this only applies if the broker has its headquarters in Germany. However, since many brokers abroad maintain their headquarters, there is no automated transfer to the tax authorities. The income from brokers abroad is paid 1: 1 to the investor . Thus the dealer is responsible for the taxation of his profits and must therefore pay his Show income to the tax office. The trader fulfills his reporting obligation if he indicates his profits from trading in binary options in his annual income tax return. If he fails to do so, tax evasion is mentioned and is therefore punishable. How our trader has to pay withholding taxes at BDSwiss can be found in our advice providers.
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The withholding tax also has to be applied to the profits from trading in binary options be paid in the amount of 25 percent. In the case of domestic brokers, this would be deducted directly from the profit made and paid to the tax office. Brokers who are abroad, however, pay the profits of their investors without tax deduction, so that the trader himself is responsible for taxation towards the tax office.
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The saver lump sum amount - so you do it applies
The saver lump sum is a annual allowance granted by the legislator. For single people this is 801 euros and for married people 1,602 euros. This means that income up to this amount does not have to be taxed. All amounts exceeding this are therefore subject to tax. However, investors only benefit from the saver lump sum if they issue a corresponding exemption request to the respective broker . However, this only applies to domestic brokerage For brokers abroad such a application cannot be made, since the flat-rate tax is not paid here.
can be claimed The saver's lump sum also applies to profits from trading with foreign brokers. In the annual income tax return, the corresponding allowance can subsequently be claimed.
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Binary Taxing options means paying 25 percent of the total income to the tax office as a flat tax. On request, however, investors can claim the saver's lump sum of EUR 801 or EUR 1,602. The exemption order is only to be placed with domestic brokers. This allowance can be subsequently registered in the annual income tax return.
Claiming losses under tax law - does that work?
Until the end of 2013, investors were still able to losses from securities transactions that arose before 2009, for tax purposes. These could then with current profits from securities trading or other capital gains, such as fixed-term yields , which led to a reduction in the flat-rate tax. In order to take advantage of the tax law benefits, profits had to be generated after January 1st, 2009 and the old losses had already been registered with the tax office. However, this possibility of offsetting has not existed since January 1, 2014. A offsetting of profits and old losses has since then only with other objects of sale, like Real estate, gold, art or antiques possible that were privately sold during the speculative period of one year. After the introduction of the flat tax in 2009 In addition, losses will only be offset against profits from the same investment group.
Since January 1, 2014, losses from share transactions can only be made with current profits from the same investment group or with profits from private sales transactions be counted. Previously, it was still possible under tax law to offset losses against profits from various investment groups. 25 percent withholding tax will then be charged on the respective balance.