Are there binary options taxes?

Binary options are currently very popular in trading on the securities market. They offer a relatively high level of security and despite this, a good return can be expected. A fact that is rarely found in risky securities trading. But what actually happens to the potential profits that can be realised? Do they have to be taxed? And what does the whole thing look like if the profits are realised by private individuals?

Do I have to pay tax on my winnings?

The fact is that you cannot earn money without the state wanting a share of it. Of course, this also applies to binary options trading. If you have decided to invest your money profitably on the securities market, you are of course welcome to do so. Regardless of whether you do this privately or as a company. If you are a private investor, you just need to bear in mind that you absolutely need a good and reputable broker to pave your way to the stock market.

But regardless of whether you make private or business profits, you have to pay tax on them. But only from a certain amount.

Note: We assume here that the tax office does not regard trading in binary options as gambling, but as a regular activity on the stock exchange. If trading were categorised as gambling, no taxes would have to be paid on the profits, as income from gambling is always tax-free. However, it can be assumed that the tax authorities tend towards the regular flat-rate withholding tax and therefore do not consider it to be gambling.

How does taxation take place in practice?

As there are no special taxes for binary options, they are subject to the general tax rate.

If you have opted for a broker based in Germany, taxes must be paid immediately. This is done with the help of the exemption order. However, most brokers are based abroad, which means that immediate payment is not necessary.

Currently, the flat-rate withholding tax is 25 per cent of the profit. It must be claimed using the KAP tax form. To do this, all profits and losses for the accounting year must be entered in the tax return. The tax office offsets this and will only levy tax on the pure profit. Ideally, you should enclose the account statements from your account with your broker so that the tax office has a good overview and you do not have to pay too much tax. If you have made a loss in one year, you can carry this loss over to the next year. It will then be offset against possible profits so that you do not have to pay more tax than is absolutely necessary.

Tip: Do not try to hide your activities as a binary options trader from the tax office. Even if your broker is based abroad, this does not mean that the tax office is unaware of your activities. Quite the opposite. The tax authorities are so well networked, especially within the EU, that fraud is virtually impossible. Therefore, always be honest and save yourself unnecessary trouble with the tax office, which can end up being really expensive in the worst case.

Simone Aescher

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Simone Aescher is the founder and operator of the successful crypto blog aescher-ai.ch.

After studying business administration at the Frankfurt School of Finance, she gained over 5 years of professional experience in the financial sector. However, her passion has always been the financial markets and investments.

In 2019, Simone Aescher finally turned her hobby into a career and founded her blog. She shares her in-depth knowledge of shares, ETFs, cryptocurrencies and much more.

As an active trader, Simone is constantly testing new brokers, robo advisors and trading apps. With her honest product reviews, she helps her readers to separate the wheat from the chaff.

With her academic background, many years of experience and practical expertise as an investor, Simone Aescher combines the ideal prerequisites for competently analysing and evaluating the financial markets.

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