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Forex Trading In South Africa

Forex Trading in South AfricaVarious traders in South Africa often showcase their lavish lifestyles on social media platforms; some at a very young age, which has contributed to the increase in retail Forex traders in the country. The Forex market is also very attractive as many young South Africans do not want to be tied down by a 9 - 5 job opting for the freedom that trading offers.

Although there is no clear regulatory framework for retail Forex trading in South Africa, below is what you need to know before setting up a Forex trading account;


Regulation;

The independent oversight body is the Financial Services Conduct Authority (previously South Africa Financial Services Board). It regulates non-banking financial institutions.

Though most retail Forex brokers accepting traders from South Africa are mainly offshore and not regulated by FSCA; they are regulated by authorities such as CySEC (Cyprus Securities and Exchange Commission), Financial Services Commission (FSC) and ASIC (Australian Securities and Investments Commission).

Brokers that have acquired the Financial Services Conduct Authority regulation in South Africa include;

  • IronFx; FSCA No. 45276
  • Plus 500; FSCA NO. 48500
  • Hot Forex; FSCA No. 46632
  • FxPro; FSCA No. 45052
  • FXTM; FSCA No. 46614
  • Markets.com; FSCA No. 43906
  • Avatrade; FSCA No. 44816
  • CM Trading; FSCA No. 38782
  • Khwezi Trade; FSCA No. 44816

Apart from the FSCA, the South Africa Reserve Bank (SARB) regulates the currency outflow to offshore accounts which are utilized largely by offshore Forex brokers. Small deposits are not subject to the regulation and retail Forex traders can make them without the need for reporting. However, deposits that exceed 1 million Rand require one to obtain a tax clearance certificate. The usual maximum offshore deposit allowed by SARB is R10 million.


Taxation;

Due to lack of a proper regulatory framework towards Forex retail traders in South Africa, most traders’ profits are not visible to the South African Revenue Service (SARS). Additionally, trading profits in most countries is categorized as capital gains and not taxable. However, profits generated from Forex trading are taxible in South Africa and treated as income tax. Individual Forex traders should file and declare their taxes in Rands if their income exceeds a certain threshold depending on age as follows;

 Taxation on income SA

Income tax in South Africa is also deductible off expenses. In the case of a retail Forex trader, expenses related to trading should be deducted from the total trading income before taxation. Such expenses may include; internet costs, trading software, trading courses, trading equipment, PC repair, water, office rent, stationery etc.

Depreciation cost of trading equipment such as the laptop may also be deducted from the trading income before taxation.

Leverage; there are no leverage restrictions in South Africa in regards to Forex trading. Traders have the freedom to choose the leverage they want by selecting a Forex broker offering that leverage level.

Age; again; there is no proper regulation governing retail Forex traders in South Africa. However, local and offshore brokers alike restrict new account opening to individuals who have obtained the age of 18 and above.


Opening a Forex Account in South Africa;

  • The first step is finding the right Forex broker. The main thing to consider is regulation where one can choose between an offshore regulated brokerage or one that also has local regulation by the FSCA.
  • Basic information such as names, email address and date of birth is required for account registration. To be fully verified; one is supposed to submit a photo of the original ID as well as proof of address (utility bill or a bank statement not older than three months).
  • Funding; various mobile wallets such as Skrill and Paypal are readily available in South Africa. Alternative funding methods include credit/debit card and bank wire transfer.

Conclusion;

As the number of retail Forex traders continue to grow; more brokers are bound to open local branches in South Africa as well as obtain FSCA regulation. Despite this influx in traders, regulatory authorities are still playing catch up in terms of creating proper regulatory structures. This means that most retail Forex traders in South Africa will continue to trade in the shadows unnoticed by this financial authorities.

Read 1251 times Last modified on Thursday, 21 March 2019 11:48

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