Trading Tax in 2026: How Trading Is Taxed in France

Trading tax: nobody likes hearing about tax, least of all in trading. Independent traders in Switzerland, Belgium and Luxembourg will not face the same headaches as those living in France. But we will try to make this topic as painless as possible!

How Trading Is Taxed

In France, trading tax differs depending on whether you trade professionally or occasionally. For most independent traders, profits from buying shares, trading CFDs or real estate capital gains are taxed at 30%:

17.2% in social security contributions

12.8% in tax; you can opt for the progressive income tax scale instead.

The tax environment may seem heavy in France, but that is the cost of living in the country. If you are a French resident, do not try to avoid tax. It is a waste of time and money. There are two certainties in life: death and taxes. We cannot help you with tax optimisation in offshore islands.

But we can help you better understand French, Swiss and Belgian taxation, as well as that of the main OECD countries.

On related topics, our articles “Swap Trading Explained for Beginners” and “The Best Trading & Brokerage Fees” complement this guide well.

Day Traders: How Does Tax Work?

Taxation, in other words tax, is one of the hardest things to understand. And the reason is simple: the rules governing tax change all the time. So one of the first steps when tackling the administrative machine is to find out as much as you can and stay up to date.

But that is not all. When it comes to the taxation of financial products, it is not just the French administration you need to understand, because all financial products are international. To truly understand the taxation of every financial product, bonds and different types of shares, and even different types of dividends, you would need an encyclopaedia.

That is why this article is only an introduction to taxation for beginners, which will be enough to fill in your tax return at the end of the year. If you have any questions, you can leave them in the comments at the end of the article!

The Flat Tax

When you open an account on a trading platform, you have access to different financial products. In theory, these products are all different and each has its own legal status. But in practice, you can consider all your gains on a trading platform to be of the same nature.

For the state, every trade is of the same nature. And the tax that applies to this trading is as follows:

All trading transactions must be recorded, gains and losses alike

30% of profits will be taken in tax.

You can carry forward a year’s losses over the next 10 years.

However, there is something you should know: when you start out, you often have far more losses than gains. And you can carry these losses forward to the following year, and the year after. In fact, you can carry trading losses forward over the next 10 years. This lets you break even before you have to pay tax. It is a real advantage!

The PEA, a Tax Shelter

Stock market traders will be interested in this special tax regime. The PEA’s is very advantageous for share trading, in other words investing in the stock market. As well as covering all European markets, the PEA gives you lower, or even zero, taxes. So want to know how it works?

A PEA (Plan d’Épargne en Actions) is a share savings plan that can be offered by any French bank or any bank with branches in France. In reality, it is not a savings plan comparable to bank savings accounts. It is more of a share portfolio.

The particularity of the PEA is that you can only use it to buy and hold European shares. In fact, the PEA lets the government channel part of French people’s savings into European industry and companies. And it works! Especially since the PEA gives you favourable tax treatment.

With the PEA, you are not under the same tax regime as other trading accounts. On a trading platform you are taxed at 30% under the PFU flat tax. But the PEA is only taxed at 17.2%, the amount of social security contributions. It is the income tax portion that disappears.

For those who are not liable for income tax, it does not change much, but for other French investors it is a great opportunity. And for the French government, it is a way of attracting capital to European companies. Everyone seems to win with this formula!

The Main Trading Assets

Taxation depends on the nature of what you trade. And when you trade, you can come across a wide variety of assets. We have selected the most common ones to help you see more clearly into trading tax!

How Shares Are Taxed

Shares are investments that give two types of return. On the one hand, you make capital gains when you sell your shares. On the other, you can receive dividends. In both cases, you are taxed under the PFU (prélèvement forfaitaire unique) flat tax of 30%. This levy applies to capital gains and to dividends.

This simplification of trading tax came from former prime minister Édouard Philippe. His government reformed trading taxes. From now on, many financial products are taxed in the same way as shares, with the 30% PFU.

This 30% is made up of 17.2% social security contributions and a 12.8% flat-rate levy. It is also important to point out that you can choose to stay on the progressive income tax scale.

ETFs and Their Taxation

ETFs, also called trackers, are actually mutual funds. With them, you can invest in gold, for example, because ETFs track the value of a benchmark asset. An ETF on gold will follow the price of gold. That way, you can invest in gold without having to buy and sell gold around the world.

In fact, the tax authorities consider an ETF to be the pooled capital of several investors, a kind of investment co-ownership. So legally, it amounts to the same thing as shares. The state often does not bother creating an ad hoc legal framework. On the contrary, it prefers to be a bit lazy.

So you pay 30% on all the profits you make with ETFs. You still have one option: some ETFs are eligible for the PEA. That way, you will only pay 17.2% tax on your profits.

CFDs: Different Tax Rules?

CFDs are contracts for difference. CFDs are the most widely used products in trading. When you trade a CFD, you open a position. As long as you do not close your position, you pay holding fees.

For CFDs, the tax that applies is identical to that on shares held in your securities account. So profits are taxed at 30%. With share trading, losses can be carried forward over 10 years, and the same goes for CFD trading.

Taxes are in the same family as the fees you pay. When you use a trading platform and open positions, you pay different types of fees. And fees can eat into the gains you have left after 30% tax. So do not hesitate to find out about trading fees!

Bonds and Taxation

The PFU (prélèvement forfaitaire unique) flat tax is the tax regime for bonds. Like shares, bonds benefit from the trading tax reform. So the profits your bonds generate are taxed at 30%.

Bonds do not work exactly like other financial products. The broker, or the intermediary who sells you the bond, deducts 12.8% for income tax and 17.2% for social security contributions. As with VAT, you have nothing to declare or pay at the end of the year. But what if you choose to be taxed on the income tax scale and your rate is below 12.8%?

If you choose the income tax scale and you are not liable for tax, you have nothing to pay. And if your broker automatically deducted 12.8%, it gives it back to you. It is rather nice to see your trading platform pay you tax, isn’t it? What’s more, bonds let you invest your money with minimal risk, and they pay interest!

Forex Taxation

Forex is one of traders’ favourite assets. It stands for foreign exchange, the currency market. It is the market where the euro is traded against the dollar, the yen or the pound sterling. And this market determines exchange rates between countries! It is one of the fundamental markets of the modern economy. But why does it attract traders from all over the world?

In France, currency taxation is grouped with the trading of other financial assets. Day traders who trade forex also benefit from the flat tax introduced under Macron. So their profits are taxed at 30%.

Forex has several advantages over other financial markets. When you start trading, you will see that there are not only different asset classes, such as shares and bonds, but also different stock exchanges. There is an exchange in New York, one in Paris, one in London, another in Tokyo and so on. But stock exchanges are not nightclubs, and they close at the same time as the post office. Since each country has its own time zone, most marketplaces close in turn for 18 hours, generally from 3 pm to 9 am. Add to that closures on Sundays and public holidays. Traders have the same grievances as railway workers!

The Leading International Trading Market

Thanks to the internet, you can trade at any time of the day or night on markets on the other side of the world. But daily market closures bother many traders. So traders turned to forex, because it is a market that never closes. Forex also has features that make it a good asset for trading, such as its volatility and liquidity.

Like the other financial assets available to trade with your favourite broker, forex gains are taxed at 30% under the PFU. However, you can opt for the income tax scale if your rate is below 12.8%.

In the past, all these products had their own rules, and trading tax was very complex. Many traders face two obstacles when they start out: succeeding at trading, which is not easy, and understanding taxation. Today, thanks to the tax simplifications of Édouard Philippe’s government, the tax return is no longer the main obstacle to becoming a profitable trader!

Trading can become a regular activity. Since the rise of online brokers and platforms such as TradingView and MetaTrader 5, there is no longer any real technological barrier between a Wall Street trader and an independent trader. However, you need extraordinary motivation to make a living from trading. It is an activity that takes a lot of energy, but also a lot of capital to generate real profits.

What Tax Rate Applies to Trading Abroad?

While taxation in France has been simplified, made accessible and, in a sense, almost humanised, what about our neighbours? We looked at France’s neighbouring countries to see whether the grass really is greener on the other side.

Trading Tax in Belgium

If you are a forex trader trading your own account in Belgium, taxation looks similar to France.

You have two options. Either trading is your main activity, in which case your results are subject to income tax. Once again, it is profits that are taxed.

Or you are a private individual. Here again, there are two possibilities:

you manage family wealth and do not trade (no regular transactions, inherited assets or assets built up from savings).

you trade or speculate (many buy/sell transactions, speculative investments)

In the first case, the Belgian government does not tax you. Any profits and returns on your savings and long-term investments are not taxable.

In the second case, however, your income is considered “miscellaneous income” and taxed at a flat rate of 33%. This is the case, for example, with forex trading, which is regarded purely as speculation.

So it is a matter of perspective! Buying shares can be seen as wealth management or as trading. The Belgian Federal Public Service Finance advises contacting a tax office. Internet users recommend contacting Belgian brokers directly and asking them the questions on your mind.

Switzerland, Trading and Taxes

Switzerland is a paradise on earth: you can escape into its mountains and its banks. Swiss taxation has a well-established reputation. Beyond the financial scandals, many films have highlighted Switzerland’s great love affair with money. And trading is no exception for this small federal state.

In Switzerland, traders are not taxed on their transactions. The only ones who pay tax are professionals, and Switzerland only taxes their profits.

Many traders decide to open a trading account in Switzerland for this reason. But if you are a French tax resident, you must pay your taxes in France, whatever country the trades were made in!

Swiss regulation remains complicated, like all regulation. And it is common to use the services of an expert to open an account in Switzerland and avoid paying tax. If you make mistakes, you risk paying penalties and fines.

Trading Tax in Canada

Taxation on trading in Canada is not gentle. Enough to make you regret leaving France if you chose this destination in search of a more trading-friendly environment.

Whatever the source of your gains, whether capital investment or day trading, you must pay 50% tax on profits. This includes selling shares and trading forex.

If you are a business, this income is considered business income, and you are taxed on it according to your tax bracket, like income tax in France.

In this case, you have the same advantage as in France: you can carry forward your losses. One small difference, though: you do not carry losses forward to future years but offset them against your other business activities. So you can pay all your business taxes with your trading losses. Not bad!

Trading in Germany

Germany attracts many traders for all types of products: forex, CFDs and shares. And for good reason: Germany has long had a very lax policy on taxing profits and capital gains.

These are taxed on the same scale as income tax, that is, 15%.

The Case of Luxembourg

Forex traders often ask about taxation in Luxembourg. This small country next to France is seen as a tax haven by its European neighbours. But when it comes to trading, this assumption turns out to be misleading. Luxembourg does not offer expatriates favourable rates. And Luxembourg tax residents are not particularly well treated either. Their only advantage: they are entitled not to pay tax if their income comes from annuities or from investing their savings.

As is the case in Belgium, assets that fall under investment are not taxed, for example shares your employer gives you or investments you inherit. So what makes the difference between these assets and trading? Once again:

the frequency of buy/sell transactions

the speculative nature of an investment: a large sum invested with high risk

selling assets shortly after buying them.

Forex trading is considered speculation

Residents enjoy other advantages in the tax brackets, because profits are taxed at the same rate as Luxembourg income tax. And this rate is 0 up to 11,265 euros! In France, tax starts from 6,600 a year. As long as you stay below 40,000 euros a year, Luxembourg will be a tax-efficient destination for you, provided you are a tax resident there!

Malta, the Mediterranean Island

What is Malta’s tax position on trading? Trading is part of Malta’s tax landscape. The country treats trading income as business income and applies income tax. As well as more favourable rates than in France, you can benefit from tax exemptions under certain conditions.

Malta has built its tax system on exceptions. The basic rule is strict, but there are various ways around it.

companies from the eurozone can set up without paying tax

some residents may not pay tax

and many other special cases

The best way to learn about Malta’s advantages, and whether the country offers benefits for traders trading their own account, is to contact a lawyer specialising in tax and trading in Malta!

Andorra, a Haven for French Traders?

Trading taxation in Andorra is attractive. It is a small state wedged in the Pyrenees between Spain and France. It is the nation of the Basques, a mountain people. And the country lives up to its inhabitants: tucked away in the mountains, it takes a three-hour drive to reach the nearest airport.

As is often the case, small independent countries survive through trade by applying lower taxes. Andorra attracts many cross-border visitors who come to buy cigarettes and petrol, and even to trade. In this country, you benefit from VAT at 4.5% and a 10% tax rate on stock market capital gains. But this only applies to dividends and leveraged products!

That is because profits made on companies in which you hold less than 25% of the capital are not taxed. This means that unless you own a company, you are not taxed. So capital gains on Facebook shares are tax-free for everyone except Mark Zuckerberg!

Moreover, Andorran financial products give access to more favourable taxation than the simple margin trading available in every country in the world.

You have two options:

become a tax resident simply by spending more than 183 consecutive days in Andorra. This is passive residence.
apply to set up a business and create a company or a sole proprietorship. This is called active residence, but this status takes longer to obtain.

To trade as a private individual, passive residence is enough! Once there, you will enjoy many advantages, such as an ideal family environment, very attractive prices on many products and proximity to Barcelona and Toulouse.

Dubai, the Eldorado?

No taxation, tax-free CFD trading, and human rights buried.

To sum up Dubai’s situation, it is indeed a tax haven. You pay no tax on your trading activity. That is Dubai’s main advantage.

Now, if the country has simply abolished taxation on trading, it is for good reason: it is hard to attract foreigners, especially French and European people, to this place. Beyond the harsh climate and questionable air quality, you will have to live with armed and global conflicts that could set the region alight at any moment. In addition, you cannot own 100% of a company in Dubai, not even 50%. The limit is 49% held by a foreign national and at least 51% by a local.

Finally, you will also have to turn a blind eye to gender inequality and to the treatment of some workers, which comes close to slavery. If taxes are your only consideration, you will feel right at home in Dubai.

Spain: Taxation for Traders Trading Their Own Account

Under Spanish law, trading profits are declared as capital gains. They are therefore taxed under the same regime as savings income, which is as follows:

19% for the first band, covering income from 0 to 6,000 euros.

Then you are taxed at 21% for the band from 6,001 to 50,000 euros.

Finally, above 50,000 euros, you will pay 23% tax on your profits.

So these tax rates are lower than in France. You can also carry forward your losses to future years, but only over 4 years, compared with 10 in France.

Estonia, the Digital Paradise

Who would think of going to the far edge of Europe to combine tax and trading?

Estonia is a country on the edge of Europe, facing vast and threatening Russia. As an aside, Russia has carried out many cyberattacks against Estonia and the other Baltic states. The response of those attacked was to strengthen their defences and IT security, so much so that IT has become Estonia’s strength.

Today the country is known for its attractive framework for developing all kinds of IT activities, including cryptography and trading. As well as innovating in these fields, the Baltic state seeks to attract talent and capital with preferential taxation.

Profits are taxed at 20%, but the most attractive advantages are how easy it is to set up a company (10 days on average) and the absence of corruption and banking secrecy, which make it a sound state. Finally, if you reinvest your company’s profits, you are not taxed on them.

Check with the French tax authorities whether Estonian taxation is compatible with French law.

London

Trading is one of the City’s specialities, but the tax framework is likely to change radically after Brexit.

London, the capital of the United Kingdom, is at the centre of a country with very complicated trading taxation. The best word to describe the law on this island is probably “foggy”, like the fog surrounding the Thames. And it really is a thick fog. In the United Kingdom, there are three types of taxes: depending on your status, professional or independent trader, you will be subject to one or another. And depending on your type of trading, how often you place orders and your gains/losses, you will be assessed differently again. So, to sum up:

the trading tools you use

the currencies you trade with

how intensively you trade

whether you invest rather than trade

these are the points on which you will be assessed to determine how much tax you pay. To find out which category you fall into, you need to consult a government body, His Majesty’s Revenue and Customs (HMRC), the British tax authority.

However, everything we know about Great Britain, especially when it comes to taxation, taxes, duties and borders, is about to change, for better or worse. So today, at the dawn of Brexit, it is probably a little early to assess the United Kingdom as a destination for trading. On the contrary, Brexit has brought many traders from the City of London to La Défense in Paris.

Morocco

Trading taxation has not particularly increased in Morocco.

Morocco seems to have a reputation as a bad student among countries fighting tax evasion and fraud. For example, OECD countries kept Morocco on their list of tax havens despite the Kingdom’s efforts to fight tax evaders. But trading has already disappeared from the Moroccan horizon.

Trading is tightly regulated for the Moroccan population, which has only recently been able to take money out of the country. Some expatriates were able to trade, particularly on forex. But this ended in 2016 when new laws were passed to show good faith to Western countries.

In addition, trading in its most common forms may be considered contrary to the rules of the Muslim religion, leverage being one example. This is one of the reasons that may explain the limited development of this activity in Morocco.

Is the Netherlands a Tax Haven?

Does the Netherlands offer favourable taxation for trading? Dutch law is favourable to businesses, and many brokers set up their European headquarters in the Netherlands. However, the factors that attract international companies are not the same as those that motivate an independent trader.

And yet in the Netherlands, capital gains on securities and property are not taxed. Only dividend tax is withheld at source, at a rate of 15%. That is the only rate you will find in the Netherlands.

So yes, the Netherlands looks like a great destination for trading, and for living too! So why not…

Favourable Taxation in Portugal

What is Portugal’s tax position on trading? The country keeps a low profile at the far end of Spain. But like Ireland, Estonia and Malta, it uses finance to carve out a place in the European economy. Each of these countries attracts capital and talent, entire companies and traders too.

Portugal has introduced a policy to attract talented people from around the world, known as non-habitual residents. This tax status gives advantages to people with high added value, such as designers or traders.

A 25% income tax rate, compared with up to 48% for other types of residents! And your dividends will be subject to a rate of around 28%. But these are not the only advantages. To attract high-potential people, Portugal includes tax breaks on inheritance, gifts and other taxes.

Israel, a Tax Haven in the Middle East

Taxation there is favourable, and not just for trading.

Until recently, Israeli taxation was favourable for expatriates: the Hebrew state did not tax income from abroad. But this changed in 2017, and you can no longer benefit from this tax advantage for trading.

Nevertheless, Israeli tax rates are particularly low. Dividends and capital gains, whether from shares, trading or property, are taxed at 20%. That is a particularly favourable rate, especially considering the country is powerful and stable. However, the conflicts surrounding Israel could put off many independent traders.

Retail Traders: Be Careful With Online Trading in Europe

Online, trading tax applies according to your tax residence, not the broker’s.

When you trade online, you can easily become the client of a foreign company without even realising it. So be careful if you want to avoid tax problems. For example, to stay on good terms with the French tax authorities, French brokers are required to provide an IFU (imprimé fiscal unique, a single tax form) that records your trading transactions in case of a tax audit and for your annual tax return. If the broker you trade with is not in France, nothing obliges it to provide this IFU, or even your transaction history. That is why, in some cases, you need to keep your trades up to date in a log!

It is therefore particularly important to know which country your trading platform comes from. If you know your broker is based in France or another European country, that also tells you something about the firm’s legitimacy. Be wary of obscure platforms from the other side of the world, in completely opaque tax havens such as offshore islands, the British Virgin Islands or the US Virgin Islands.

When You Choose to Move Abroad for Tax Reasons

What you need to know:
French taxation may discourage you from trading. But bear in mind that most of the tax advantages of these countries are only available if you are resident there. On average, you need to live there for more than 183 consecutive days in a year to qualify. If you want to become a tax resident of one of these countries, you therefore give up your French tax residence. Both points are important and should be kept in mind when choosing to move abroad for tax reasons.

France has a heavy tax system. That is a fact. But in France you enjoy benefits you will not find anywhere else, such as the standard of living, healthcare coverage, policing, the crime rate… People tend to think France is hell on earth. But it is one of the best countries in the world.

If you leave, you could choose a really low tax rate, in Dubai for example. But are you going to give up the French countryside and French quality of life to settle in Dubai? There, you know no one, you are not familiar with local customs and you are not used to the climate…

European Tax Havens

Then there are European countries such as Portugal and Switzerland, which are close to France but have favourable taxation. But here again, you will have to give up your loved ones, your habits and sometimes your language. If tax really is your main concern, these are undoubtedly destinations where you will thrive. Otherwise, you may regret leaving.

And do not even think about fooling the tax authorities by pretending to live abroad to enjoy the tax climate and the Parisian climate at the same time. The French tax authorities’ control tools are powerful, and cooperation between European tax services has become effective.

Why File Your Return? What Are the Risks of Tax Fraud?

In France, the tax authorities do not joke around. If you tried to fool them or deliberately filed an incorrect return, here is what awaits you:

0.20% monthly interest on the amount of unpaid tax. And this rate is calculated from the start, not from when the tax authorities claim it. On top of that, you can add a surcharge of 40 to 80%.

For example:

Mr Fraud hid a trading gain of 100,000 euros from the tax authorities.

He should have paid 30% tax on this gain, so he owes 30,000 euros.

The audit takes place one year later, so 12 months have passed.

The tax authorities claim an 80% surcharge.

When the tax authorities issue the penalty, the total is therefore

30,000 + 0.002 × 12 × 30,000 + 0.8 × 30,000

Which gives us

57,720 euros to pay.

Tax penalties are proportionate to the offences you commit, as shown in the following chart.

How to File Your Tax Return

To declare your trading income, two boxes must be filled in. These are boxes

You can also declare your losses, which can be offset against your gains over 10 years.

Filing your tax return is much simpler with French brokers. French brokers, or French banks that offer trading or share portfolios, are required to provide you with an IFU, the imprimé fiscal unique (single tax form). It is issued to help you declare your income correctly without making mistakes. It is a user guide to your tax return, which your bank also sends you every year.

This is one of the reasons why choosing a broker from the country where you live matters. When you choose a broker in the country where you are a tax resident, you can be sure the broker will be as close as possible to local law. That way, you will avoid any administrative problems that could lead to heavy fines.

If you stay in France, choosing a French broker is very important. If you do not have an IFU and the broker does not send you your transaction history, you are almost certain to file approximate tax returns for your trading. So watch out for a tax reassessment!

Step by Step

To declare your gains or losses to the French tax authorities, you first need your transaction history. There are three scenarios. In the first, you have recorded every transaction yourself in a log or an Excel file. In this case, you are in the most comfortable position and have probably already calculated your returns. By adding up every gain and subtracting every loss, you get your profit.

In the second scenario, you have obtained the history from your broker. If it is French, this will not be a problem. But if it is abroad, nothing obliges it to keep an up-to-date record of your transactions or to send it to you. In some cases, the trading platform offers you an Excel file for 40 euros. And sometimes they simply do not have it.

If you face this last scenario, you will have to deal with a blank. You have several options: either you try to fill in the transactions from memory, knowing how much you had and what you earned, or you simply declare your profits and hope you are not audited. But we advise against this: the wisest thing would be to contact the tax office directly and ask them, to show your good faith.

The Best Time to Do It

Nobody likes spending their Saturday afternoon at the tax office, just as nobody wants to spend their Friday afternoon at the dentist. Yet you have no choice. Do not wait until the December deadline to go to the tax office with your questions. You risk waiting even longer, and you will regret not having hurried.

Taxes are due at the end of the calendar year, that is, 31 December each year. By that date, you may already be facing penalties. So do not wait until November to ask yourself questions about your tax regime or tax bracket. Go as soon as you have a question. That is what they are there for.

Over Time, It Becomes a Habit

Nobody can know the tax return by heart, because it changes during the year. Apart from administrative law enthusiasts and tax inspectors, few people keep up with tax changes until they receive their IFU.

But once you have filled in your first tax return, everything will seem simpler. It is like filling in a registration form, only much more complicated. The problem is often finding the supporting documents, digging out receipts and proof of purchase, calculating the tax you owe and so on.

And always be careful, because if you overpay, the tax authorities will not come knocking on your door to give you your money back. Conversely, if you make a mistake on your return, you will have interest to pay and risk a surcharge if the tax authorities consider you acted in bad faith.

Staying Informed

Trading taxation is as important as industrial news about Tesla or announcements from the ECB.

So even if you do not have a burning love for tax law, at least take an interest in the taxation affecting your sector. If your trading activity grows and you can build a business around it, you should hire a chartered accountant as soon as possible. With an accountant, you will have nothing to worry about and can get on with your work. But of course, the cost will make you realise this kind of investment is reserved for the wealthy.

An annual set of accounts costs between 1,000 and 10,000 euros. So it is up to you!

5 Tips for Filing Your Taxes Easily

Here is a summary to help French residents. If that is you, and you trade to earn extra income, these 5 tips are for you. You should write them on a scrap of paper and pin them to the wall next to your computer. These tips will help you avoid any problems you might have with tax and trading. Let’s go!

1. Keep a Record of Your Transactions

Trading transactions are commonplace. It is through many transactions that a trader manages to generate gains, and some of these transactions are losers. When you pay fees, you are paying a kind of tax. Think of it as paying tax on losses.

Under French taxation, you only pay tax on gains, or rather on profits. So you need to know exactly what your gains and losses are, and not just keep track of your gains. This is the trap many traders fall into: since profits are what is taxed, you have to keep a history of all transactions to prove you have not hidden money somewhere. In the event of a tax audit, if you do not have a log and the broker is not based in France, you will have no chance of perfectly recreating your transaction history.

If you are dealing with the tax authorities for the first time and this happens, it may not be serious. If you have committed small amounts and show good faith and cooperation, you can hope to get away with a warning. But if the financial and tax authorities think you are hiding something, watch out, especially if you are known to the tax services or have other irregularities in your return. The tax authorities do not joke about trading, or about anything else for that matter. They are not exactly funny.

2. Declare Your Accounts to the Tax Authorities

“Tax return” is not what comes to mind when you start trading. And yet!

When you open a new account with a new broker or online trading platform based abroad, you must declare it to the tax authorities. To do so, you need to fill in form 3916. You can also make a declaration on plain paper. In any case, you must inform the tax authorities of certain information about this online trading platform, namely:

the account holder’s name

the country of residence

the broker’s country

the account opening date

the account number

in short, all the information needed to identify the account with certainty and link it to you as a taxpayer.

You are required to declare these accounts. If you do not, you will be heavily taxed in the event of a tax audit. For French brokers, don’t worry: the account is automatically reported to the French tax authorities. Another advantage of choosing a broker based in France! And yet another reason to find out exactly which country your trading platform comes from.

3. Don’t Bother With Tax Optimisation on a Small Budget

Tax optimisation can be a dream for some people who see their meagre, hard-earned profits requisitioned by the French state. And it is not unusual to see amateur traders who live on benefits or unemployment allowance, and who have enjoyed the fruits of the French state since birth, start feeling like anarcho-capitalists as soon as they earn their first euros from trading.

First of all, be aware that trading creates no value. There is no benefit for industry or for humanity. When you trade, you earn money that another, less skilled trader has lost, the same money you will lose at some point. It could be compared to a lottery or a casino. So it is only normal to pay tax. You need to know how to be a little generous. Otherwise, what is the point of having money?

What’s more, tax optimisation is not for small sums. If you have less than a million euros, you will lose money with the tax evasion schemes you see in films. These are schemes that rely on economies of scale. They become profitable above a certain threshold, but below a certain amount they are not worth it.

However, you can find attractive solutions with the PEA.

4. Opt for Lower-Taxed Solutions Such as the PEA

The PEA is not tax evasion; it is perfectly legal optimisation that is good for the economy. The PEA is exempt from the 12.8% levy that represents income tax in trading. As a result, the PEA is taxed at only 17.2%. The reason for this favour from the state is that the PEA is limited to European shares.

With this tax “optimisation”, you can reduce your investment costs to levels that some of the tax havens we looked at earlier do not offer.

17.2% on profits from shares, given that shares are very volatile products that will probably be the speculative engine of your portfolio. This is very useful for putting in place investment and trading strategies, and why not a financial plan.

5. Factor In Taxation

A financial plan should be drawn up at the very start of your life as an investor. It is a map, a guide that tells you where you started, where you are and where you are going.

In other words, it is a plan that tells you how much money you had when you started investing, how much you have now and how much you will have at the end. And the end point and the goal are, of course, things you decide.

When you start investing, you look at relatively short periods, such as 1 to 5 years. With trading, you are always looking at very short periods of a few hours. But these trades can fit into financial plans spread over decades.

For example, suppose you have put 90% of your investments into very safe, low-return positions. You then have 10% of your capital left to speculate aggressively. With the remaining 90%, you can borrow and use leverage backed by your savings.

Gross/Net Financial Plan

So if part of your money is invested for the next 20 years, you can have trades that take place every day.

Your financial plan must take into account the gains you will make, or aim to make. And it must take your returns into account. That means gains but also losses: your financial plan should assess potential trading losses, as well as usage fees, transaction costs and taxes.

Choosing your tax residence and choosing how to optimise your taxes are therefore decisions you must make before you start trading, when you draw up your financial plan. This shows how important and fundamental these points are when trading independently.

Final Word

If you are new to trading, this article will have explained how to understand your tax return. As a newcomer, you are lucky: trading taxation has been considerably eased recently. Not only are you taxed less, but it is also much simpler. 30% on all profits: clear!

Now that you know how to fill in your income tax return and how much of your profits will go to the tax authorities, you can draw up your financial plan. The last step before you start trading!

If you have any questions, feel free to leave them in the comments!

Read also: Investing in UCITS Funds