The BMF control hammer explained using an example
In order to clarify the new set of rules, we will explain them using two examples:
Example 1: A successful small speculator
He has a certain number of losing trades
His profit is 100,000 euros, he makes a loss of 80,000 euros
€100,000 profit – €80,000 loss = €20,000 difference
According to the old regulation, our successful small speculator would now have to pay tax on 20,000 euros, since this is the difference between profit and loss. Due to the new set of rules, however, he has to pay four and a half times the tax, i.e. 90,000 euros. The reason for this is that only 10,000 euros are deductible. The tax on the profits of successful trades is automatically and immediately deducted. The investor has to get the refunds on the losses back from the tax office.
Example 2: A less successful small speculator
He has a certain number of losing trades
His profit is 40,000 euros, he makes a loss of 50,000 euros
40,000 euros profit – 50,000 euros loss = -10,000 euros difference
According to the old regulation, our less successful small speculator would not have to pay any taxes. This changes with the BMF control hammer. In addition to the real losses of 10,000 euros, he now has to pay taxes on the 40,000 euros in profit. The sum with which losses can be offset against profits, however, is limited to 10,000 euros. In plain language, this means: Although the trader has made a mess, after deducting the losses, he still has to pay taxes on the 30,000 euros in profits that he no longer has.