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🪁ARBITRAGE mini-series: How is it Taxed?
Unlock the secrets of Arbitrage: Turning price gaps into profit!
MoneyMoves
January 26, 2025
In this mini-series, we’re tackling all things arbitrage! By the end of this week, you’ll know exactly how to take advantage of arbitrage to build your wealth in 2025. Ready to learn? Let’s go!
Does SARS approve Arbitrage? < we’re here!
Does SARS Approve Arbitrage?
Short answer: Yes.
Firstly, arbitrage trades involve compliance with SARS because you must obtain SARS approval to transfer funds out of the country (remember, we're buying in the US and selling in South Africa).
Even better - Not only does SARS approve arbitrage, they love it! Why? Because the profits you earn are taxable, making arbitrage a neat income stream for SARS.
How is Arbitrage Gains Taxed?
SARS taxes investment income through two primary methods: Capital Gains Tax and Income Tax.
Capital Gains Tax (CGT):
CGT applies when you hold an asset for more than 12 months before selling it.
Example: If you purchase a property in 2023 and sell it in 2025 for a profit.
CGT rates in South Africa range from 7.2% to 18%, depending on your income bracket.
Income Tax:
Income tax applies when you hold an asset for less than 12 months before selling it for a profit.
Example: Buy Sasol stock in January 2025 and sell it in April 2025 for a profit.
Income tax rates in South Africa range from 18% to 45%, based on your marginal tax bracket.
Since arbitrage is a short-term trading strategy involving frequent buying and selling to capitalize on price differences, profits from arbitrage are taxed as income tax in South Africa.
Is It Still Worth It?
Absolutely.
For example, if you trade with a capital investment of R100,000 and earn a 1% profit over the whole cycle (approximately R100,000 profit), paying 40% tax still leaves you with R60,000 in net profit. That’s a 60% ROI annually, far exceeding the average returns of the stock market.
Keen to Arbitrage?
Disclaimer: This is not financial advice.
Who Are We?😎
 The Knowledge Chest | Paul holds an Honours degree in Financial Analysis from Stellenbosch University. With a career spanning investing, accounting, and education, Paul is committed to becoming the best financial planner in South Africa. Despite his many accolades, Paul insists that his greatest achievement is that he is dating a yoga teacher. |
 The Anchor | Ingrid holds a BA Honours in Journalism from Stellenbosch University. She is a self-diagnosed workaholic, excelling in various roles such as marketing, publicity, social media, and strategic partnerships. Ingrid's commitment to promoting wellness and balance extends beyond her professional endeavours, as she is also an avid yoga teacher. |
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