Earning money with binary options, many private investors like you and me achieve it everyday. Binary options can be a very profitable business and offer a strong added revenue. However, when you start to earn money on this type of product, the thorny question of tax comes up. We will give you some information to enlighten the taxation of your profit made with binary options trading and on the solutions that help make it lighter.Should you declare the binary options profit or not ?
The binary options traders who make small earnings and earn a couple of hundred euros per month generally don’t declare this income to tax authorities of their country as it is secondary revenues. Normally, whatever the value and the source of the revenue, it has to be declared and you should be taxed on it as well as on your main revenue. The Majority of the « small » traders who make some profit with binary options don’t declare these « small » revenues and never have problems. We don’t encourage you to hide your revenue but it’s totally up to you.
When you are able to live with binary options and the profit amount of several thousands of euros per month, you can start to think about the taxation more seriously. In some countries of the European Union the tax rate can go up to 40% or more (for the biggest revenues), the trader who earns between €5,000 and €10,000 (or more) of profit every month with binary options may feel bad about paying so much taxes because of their activity. The solution they choose is generally to open an offshore bank account.
The « offshore bank account » or « offshore account » is a type of bank account that can be opened in a bank and used the same way as any other standard bank account. This bank account is called « offshore » because it is domiciled abroad, in another jurisdiction. Offshore bank accounts are used by individuals or by companies that want to keep their capital out of the country where they are legally based. Generally offshore bank accounts are localised in jurisdictions where the taxation is more favourable and in certain cases null. Hong-Kong, Belize or the Cayman Islands for example are very popular for this type of service.
As a binary options trader you can open an offshore bank account to avoid your current taxation. You simply have to send your bank details to the binary options broker to receive your money over there. Let’s say that you are a french trader, you can have an offshore bank account in Hong-Kong to not pay any tax, and easily buy a house with that money. You can cumulate your profits too, live in the country where your offshore account is more than 6 months per year and benefit with the tax rules of this country, pay a lower amount of tax, benefit with the special double tax agreement and come back with your money in your native country to enjoy it.
You got it, an offshore account doesn’t always mean tax fraud. In the case where individuals or professionals use offshore accounts, it’s to optimise the taxation on the profit they make with their own activities. You will probably pay tax but it will be a lower rate thanks to the advantageous foreign jurisdictions.
For example, in Germany the maximum tax rate is 45%, in Austria and Belgium, it’s about 50%, Denmark has a maximum tax rate of 59% and France 45%. When you want to earn a lot of money with binary options, you understand better the desire to optimise your taxation and possibly think about opening an offshore bank account.