Are my currency gains capital or income?
It depends on why the transaction was entered into, not on the instrument. Currency bought and sold to make a profit from the movement itself has the character of trading, and the profit is ordinary income with expenses and losses available against it. Currency acquired because you needed it for something else — buying a property abroad, settling a debt, funding a move — produces a gain that is generally incidental to that purpose and treated on a capital footing. The same pair, the same broker and the same screen can therefore give two different answers, decided by the purpose behind each transaction.
Why is my forex gain income in one country and capital in the other?
Because each country applies its own characterisation rules to the transaction, and nothing requires them to agree. One may look at the frequency and purpose of your trading and conclude you are carrying on a business; the other may treat the same positions as investments. The consequence is not merely presentational: the amount brought into charge, the rate applied and what you can do with a loss all differ, and relief for tax paid abroad depends on both countries taxing the same income on the same footing. A divergence can therefore leave part of the charge unrelieved.
My forex broker gives me no tax statements — what records do I need?
Enough to rebuild each transaction independently of the broker. That means, per position, the pair, the direction, the date and time opened and closed, the amounts on each side, the financing or rollover charged and the commission. You then need a defensible conversion into the currency you file in, taken at the rate for each transaction date rather than one annual average. Bank records showing money in and out of the account are the corroboration, because an administration will usually start there. Offshore brokers frequently provide a raw trade export and nothing else; that export is the foundation.
Do I report a gain on currency moved between my own accounts?
Possibly, because a gain on foreign currency can arise when the currency is disposed of, and converting back into your own currency is a disposal even if both accounts are yours. What you paid for the currency and what it was worth when you converted are what matter, not whose name is on the accounts. Many systems soften this for ordinary personal transactions, with an exemption or a threshold for gains that do not arise from a trading purpose. Whether you are inside that relief returns you to the purpose question rather than to the mechanics of the transfer.
I mix personal transfers and trading in one account — is that a problem?
It makes an already fact-sensitive question harder to answer in your favour. Characterisation is applied transaction by transaction on the purpose behind each, so a single account holding speculative positions alongside money moved for family or property reasons still has to be separated — and it is you who has to separate it. Where the record cannot distinguish them, the pattern of the account as a whole tends to be read against the position you want to take. Separating the activities into different accounts is the cheapest fix, and it can only be applied going forward.
Can a currency loss reduce my other income?
Only where the transaction was on an income footing. A loss from trading currency as a business is an ordinary loss and can generally be set against other income in the year, with rules for taking the excess to other years. A loss on a capital footing is ring-fenced against gains of the same character and waits in carry-forward until there are gains to absorb it. Because purpose decides which you have, a trader who reported profitable years on a capital basis cannot usually reach for income treatment when a loss year arrives.
I have not filed for several years while living abroad — what are my options?
Both countries have routes back, and using one before they contact you is what preserves the relief. On the US side there are procedures aimed at taxpayers whose failure was not wilful, including one designed for people living outside the country, and separate procedures for late account reports and information returns alone. Canada has its voluntary disclosures programme and taxpayer relief for penalties and interest. Filing quietly and hoping is the one approach with no protection attached to it. See catch-up filing.
How would a foreign tax authority know I am resident there?
Mostly from information you or your bank already provided. Account-opening forms ask you to self-certify tax residence, and that certification is reported between authorities under the Common Reporting Standard or, for US accounts, under the FATCA framework. Beyond that: employer and payroll filings, property registries, immigration records and the tax filings of anyone who paid you. The realistic planning assumption is that the data arrives. See FATCA and information reporting.
