Money exchange businesses play an integral in the global market. Without people who specialize in currency exchange, many cannot buy goods and services in foreign countries. According to analysts, the forex exchange business is one of the most lucrative ventures that require little capital. However, there are some rules that govern this business we thought you should know.
Good record-keeping is essential
The success of business in forex depends on how you keep complete and accurate records of daily transactions. Record-keeping is mandatory if you run the business from Canada. Authorities use the records to keep track of transactions and identify illegal activities, including money laundering. The government requires that you keep a daily cash sheet and retain all the bank and check registers statements. All these documents must be available for public scrutiny.
All forex dealers must be licensed
A license is required by the authorities to run a currency exchange business in Canada. Failure to obtain a license can result in legal ramifications. In most places, it is considered a serious criminal act that is punishable by several years in prison. A license shows that your business if fully compliant with the OSC and BCSC standards. You must have enough capital and no criminal history to qualify for a forex business license. Also, the application must include the Articles and Memorandum of Association. This means that you must have a pre-existing company.
The fees that you charge depend on the target market and where you plan to operate from. Some municipalities limit the amount you charge while others allow free trading without regulations. However, most places have limitations to prevent unfair competition among traders. These limitations also protect buyers from exploitation. The amount you can charge often depends on the money being exchanged. For instance, if you are cashing a check worth $1,000 you are allowed to charge a maximum interest of 3 percent of the face value of the check.
You are required to report taxes
Like any other business in Canada, you are required to report taxes on an annual basis. The taxes should be in Canadian dollars and not in the foreign currency in which you conduct the business. You should report both the profits and losses during a fiscal year and make them available for scrutiny by tax agencies. The Canadian government currently taxes 50 percent of capitals gains. The tax rate is at 43 percent. For instance, if you have a capital gain on profits of $100, you will attract a tax rate of $21.50. This methodology also applies to losses. Keep in mind that the government does not tax unrealized capital gains.
In summary, you must be aware of the rules governing forex trading in your country to avoid future problems. Additional resources can be found at Interchange Financial.