Here is a country where income from active trading is always taxed as capital gains

[Maverick2608]

7 years ago, I asked the swiss tax authorities whether trading income is taxed as regular/business income rather than capital gains depending on the volume and frequency of trading. The answer was yes.

I paid a law firm from Portugal to confirm that the same is true for Portugal.

I paid a tax adviser who confirmed that the same is true in England and Malta.

It is my understanding that in the US short term trading is taxed as regular income.

Consequently, I assumed income from trading depending on conditions such as volume, frequency, education, former jobs and so on is always taxed as regular/business income all over the world.

However, a few days ago I was told that in Sweden trading income is always taxed as capital gains irrespective of volume, frequency and other conditions. (I am aware of the “investeringssparkonto” where you are taxed around 1% of total capital, but for different reasons that is not relevant in this context of highly active trading).

I contacted the Swedish tax authorities who confirmed yesterday that personal trading income will always be taxed as capital gains and never as regular/business income.

Question:
Is anyone aware of other countries, where income from trading is exclusively taxed as capital gains and never as regular/business income?

 

[DaveV]

Puerto Rico, Act 22.
Total tax (Federal and Local) on capital gains: 4%
However, you may want to wait a couple years to allow the infrastructure to fully recover Hurricane Maria.

 

[Xela]

whether trading income is taxed as regular/business income rather than capital gains depending on the volume and frequency of trading. The answer was yes.

I paid a tax adviser who confirmed that the same is true in England and Malta.

That's true as a brief generalization, both in Malta and in the UK, but there are exceptions and alternatives in both jurisdictions. With apologies for sounding pedantic (if I do) it's not quite as simple as that description implies, either in Malta or the UK. (I've lived, and traded for a living, in both countries).

 

[southall]

In the UK, when i read about it years ago. The tax manuals seem to say that if your profits are coming from mostly making the bid-ask spread it was income tax whereas if you were trading directionally it was capital gains.

Regardless in the UK the corporation tax rate is currently 19% and will fall to 17% in 2020. So if in doubt traders can go down that route.

 

[Maverick2608]

That's true as a brief generalization, both in Malta and in the UK, but there are exceptions and alternatives in both jurisdictions. With apologies for sounding pedantic (if I do) it's not quite as simple as that description implies, either in Malta or the UK. (I've lived, and traded for a living, in both countries).

I am aware of corporate set ups (somewhat complex) that achieve a lower effective tax rate in Malta. I know that the Malta set up uses an offshore corporate structure which has been cleared by the tax authorities in Malta. Maybe the same set up is being used in the UK?

When the tax object is a person, I am not aware of any strategy that achieves a lower tax rate neither in Malta nor the UK. But I am not an expert in the two jurisdictions, so there may well be possibilities.

 

[Xela]

I am aware of corporate set ups (somewhat complex) that achieve a lower effective tax rate in Malta. I know that the Malta set up uses an offshore corporate structure which has been cleared by the tax authorities in Malta.

Yes, indeed ...

I am not aware of any strategy that achieves a lower tax rate neither in Malta nor the UK.

There's spread-betting - not suitable for everyone - in the UK, which is free of all income and CG taxes, and then there are also the "UK-resident but not UK-domiciled" tax provisions, which are complicated and widely misunderstood (especially by politicians!), but can be relevant to such situations.

 

[Maverick2608]

... and then there are also the "UK-resident but not UK-domiciled" tax provisions, which are complicated and widely misunderstood (especially by politicians!), but can be relevant to such situations.

It is my understanding that the "UK-resident but not UK-domiciled" tax provisions for a highly active trader trading large volumes require a corporate set up, since a person's trading income is not considered foreign income?

 

[Xela]

It is my understanding that the "UK-resident but not UK-domiciled" tax provisions for a highly active trader trading large volumes require a corporate set up, since a person's trading income is not considered foreign income?

Yes, definitely. My understanding is that without that, if the actual trading activity is (provably) done inside the UK by a "non-dom", it will be considered to be "earned in the UK" and taxable (income tax), and even with that, it will require real care in its set-up, to be legal and watertight.

 

[NoodleStrudle]

I can name some very safe and comfortable countries where trading gains are not taxed at all.

7 years ago, I asked the swiss tax authorities whether trading income is taxed as regular/business income rather than capital gains depending on the volume and frequency of trading. The answer was yes.

I paid a law firm from Portugal to confirm that the same is true for Portugal.

I paid a tax adviser who confirmed that the same is true in England and Malta.

It is my understanding that in the US short term trading is taxed as regular income.

Consequently, I assumed income from trading depending on conditions such as volume, frequency, education, former jobs and so on is always taxed as regular/business income all over the world.

However, a few days ago I was told that in Sweden trading income is always taxed as capital gains irrespective of volume, frequency and other conditions. (I am aware of the “investeringssparkonto” where you are taxed around 1% of total capital, but for different reasons that is not relevant in this context of highly active trading).

I contacted the Swedish tax authorities who confirmed yesterday that personal trading income will always be taxed as capital gains and never as regular/business income.

Question:
Is anyone aware of other countries, where income from trading is exclusively taxed as capital gains and never as regular/business income?

 

[CSEtrader]

I can name some very safe and comfortable countries where trading gains are not taxed at all.

Which are those countries, please?
Bahamas is tax free and only 40 minutes from Florida, if you need it.