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Tax discrepancy?

  • 01-12-2010 3:18pm
    #1
    Isoaxe
    Registered Users, Registered Users 2 Posts: 74 ✭✭


    Hi, just have a quick question about a perceived difference in the rates of taxation on what amounts to essentially the same thing.

    Profits gained from spread betting (as far as I know) are not subject to any form of tax in Ireland, since it is essentially viewed as gambling. However, profits gained from foreign exchange (Forex) speculation on the market are charged at the appropriate income tax rates. Therefore, if you are in the business of foreign-exchange speculation, would it not be much more tax-efficient to open a spread-betting account instead of a standard Forex account?

    I must be missing a trick here, or else have gotten my facts wrong, but in any case if someone would like to shed some light on the situation it would be appreciated.


Comments

  • #2
    Bullseye1
    Closed Accounts Posts: 5,731 ✭✭✭Bullseye1


    Don't you pay a small form of tax on every bet? But the winnings are tax free.


  • #3
    Isoaxe
    Registered Users, Registered Users 2 Posts: 74 ✭✭Isoaxe


    Bullseye1 wrote: »
    Don't you pay a small form of tax on every bet? But the winnings are tax free.

    I don't think the excess spread is a tax, it's the way the brokers/dealers make their commission. Instead of charging you a fixed fee off the top, they might take a 2-3 pip fee instead.


  • #4
    DoMyBooks
    Registered Users, Registered Users 2 Posts: 355 ✭✭DoMyBooks


    AFAIK spread betting is treated in the same way as betting on horses. Not taxable under income tax. The reason is pretty simple. If you pay tax on your winnings you could claim your loss against other income and the vast amount of people loose.

    Slightly off topic but take a look at world spreads accounts. Savage profits on very small numbers of staff.


  • #5
    Isoaxe
    Registered Users, Registered Users 2 Posts: 74 ✭✭Isoaxe


    DoMyBooks wrote: »
    Not taxable under income tax. The reason is pretty simple. If you pay tax on your winnings you could claim your loss against other income and the vast amount of people loose.

    That's a good point. So with a normal forex account, gains are subject to income tax and losses are tax-deductible. But with a spread account, there is no income tax and losses are not tax deductible.

    But does that mean that a spread account would be a poor hedging vehicle for someone with assets in EUR that is investing in USD, since any FX losses would not be deductible from 'normal' earned income? There doesn't seem clear advantages/disadvantages either way, I suppose it depends on your exact financial situation and point of view.


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