Tax treatment of CFDs

Please consult your tax advisor first to get an expert opinion on the tax treatment of CFDs. For some years now, there has been a uniform regulation regarding the taxation of such income. It is advantageous to inform yourself about the tax treatment of contracts for difference in order to avoid difficulties with the tax office. We will show you what the final withholding tax is and what you should bear in mind when it comes to taxation.

What exactly is the final withholding tax?

The final withholding tax or capital gains tax for CFDs has been in effect in Europe since 1 January 2009. This tax is levied on all investment income that exceeds a set saver's allowance. What counts as investment income is clearly defined. This includes, for example, interest on a savings account or current account, dividends, gains on the sale of shares and also all profits from trading in Exness.

If profits are made with CFDs that exceed the saver's allowance, a final withholding tax of 25 percent is due.

If profits are made with CFDs that exceed the saver's allowance, a final withholding tax of 25 per cent is due.

The following rules apply to the saver's allowance: For a single household, the limit is 801 euros and for spouses, the allowance is 1,602 euros. So if you have concluded a profitable trade, the tax is withheld directly by the broker.

However, these rules only apply to CFD brokers that have their headquarters in Europe - if you are a customer of a foreign broker, it is up to you to tax the profits on your own responsibility. As a rule, you can offset the profits and losses made and only have to pay tax on the actual profits.

Costs of CFDs: The advantages and disadvantages of the final withholding tax for CFDs

In the past, profits made from trading were taxed individually at the investor's applicable income tax rate. Since 2009 it is now the case that all capital gains must be taxed at 25 percent. This ensures uniformity, which simplifies tax accounting considerably.

In addition, you can offset losses from CFD transactions against all other gains, such as dividends or interest. In the case of share losses, on the other hand, you can only offset profits from share transactions. When trading with CFDs, it is also irrelevant whether you have several trading accounts with different brokers and for the assessment of the taxable income, all costs can be deducted that are related to the respective trade. These include, for example, financing costs or commissions.

One of the disadvantages of the final withholding tax is the fact that in Europe taxation is not only due at the end of the year for the tax return, but is calculated for every trade made.

Conclusion on the final withholding tax

•     The regulation on the final withholding tax came into force on 1 January 2009.
•     All investment income is taxed at a flat rate of 25 per cent.
•     There are allowances for the final withholding tax
•     Profits earned with CFDs can be offset against losses incurred
•     European CFD brokers retain the tax independently after each trade.
•     With foreign brokers, the profits must be taxed independently.