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The last session in 2023 is underway. Are you holding losing positions? Remember about tax!
Friday, December 29 is the last session in 2023. For many traders, it is a time to sum up their investment results, make plans for the future and set goals for the next year. These are also the last hours that affect the amount of tax we will pay on our transactions. If this year turned out to be profitable for you, and you currently have significant losses in your open positions, it is worth considering what to do with them. Why? The reason is simple.
First of all, we would like to point out that this article is of a nature purely informational. We never, under any circumstances, provide our readers with advice or guidance on how to enter or exit positions. Everyone should decide for themselves what to do with their transactions and how to manage their investment portfolio. However, in an educational article, we want to draw attention to a detail that not everyone may be aware of.
Last day for tax assessment
Friday, December 29, 2023 is the last settlement day this year. The tax ordinance in Poland obliges the taxpayer to calculate the tax base only for closed positions in a given year. Positions that remain open are not taken into account, as are deposits and withdrawals from the account. You can read more about the settlement of stock exchange and CFD transactions in this 3-part series of articles.
In a situation where, for example, a trader has recorded a large profit in closed positions, but at the same time has a loss in open positions, according to applicable regulations, he or she must pay a tax of 19% on the profit achieved. For example: if we have so far closed positions that brought us a profit of PLN 100, we must pay 000% tax on them in 2024, i.e. PLN 19. And it doesn't matter that we have -PLN 19 or -PLN 000 in currently open positions. If we close our losing position on January 50, 000, we will still have to pay the above-mentioned PLN 100 by the end of April 001.
However, if such a losing position is closed in December 2023 and reopened even a second later, after reaching the assumed Take Profit / Stop Loss level, its final result will remain the same, but the tax due will be significantly reduced. So, for the above example, if the loss closes at -PLN 50, our tax is reduced by half, but if the loss exceeds -PLN 000, we will not pay anything.
Of course, this solution has its drawbacks. First of all, we will have to pay the spread and/or commission again due to reopening the same transactions. Additionally, if for some reason we wait to open a new position, it may turn out that the final balance will "worse" (this is a theoretical assumption, because the market can be exceptionally calm at the end of the year). When trading highly exotic assets with low turnover, we may also encounter a liquidity problem. But in practice, that's pretty much it.
Problems with settling your tax? Nothing similar!
And here we would like to remind you again that our Club Members have free access to the full version Forex Club – Tax application. It is a program that works with popular Forex platforms and allows you to calculate tax liabilities in just a few moments, regardless of the currency in which you run your account and whether you have concluded 50 or 5000 transactions. For people who do not belong to Forex Club from the beginning of 2023, it is also possible to use the program after purchasing a license - just use shop on our forum.
The next version of the application will be released in February 2024 - Forex Club - Tax 9.0, so we recommend waiting with settlement until then. We will keep you informed about the details via our social media channels, newsletter, forum and website.
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