How do individuals pay taxes on stocks? Tips for those who sell stocks

Currently, investing in the stock market is no longer unusual for individual investors. When you decide to sell stocks, the follow-up question is “How do I pay taxes?” Understanding the tax collection mechanisms and planning strategies is essential for every individual engaging in investments. This article will clarify the types of taxes, when they are due, and how to legally reduce your tax burden.

Types of Taxes Related to Selling Stocks

1. Capital Gains - Profit from selling stocks

When you sell stocks at a higher price than the purchase price, the difference is called Capital Gains, which is often taxed.

Short-term Capital Gains (: Occur when you hold stocks for less than 1 year before selling. These gains are taxed at the general income tax rate, which is usually higher.

Long-term Capital Gains ): If you hold stocks for more than 1 year, taxes are applied at a lower rate to promote long-term investment.

( 2. Dividend - Dividend income

Dividend is money paid by a company to shareholders from profits. Individuals receiving Dividends must pay taxes according to the country’s regulations, often deducted at source.

) 3. Additional Fees and Tax Categories

Besides profits, selling stocks incurs other expenses such as:

• VAT on transaction fees ###VAT###
• Specific Business Tax on securities sales
• Commission (Commission), some of which may be deductible

When do individuals need to pay taxes?

( Example scenarios requiring tax payment

Profit from selling stocks: An individual who sells stocks with any profit may need to pay taxes, even if the profit is small.

Receiving dividends: When a company pays Dividends, individuals must report and pay tax on dividend income.

Trading derivatives: Trading Futures or Options also involves tax obligations according to regulations.

Stock tax regulations for individuals in Thailand

Thailand has a different stock tax system compared to other countries:

No income tax on stock sales: Individuals selling stocks on the Stock Exchange of Thailand do not have to pay income tax on profits, which is favorable for investors.

VAT ): 7% of the transaction fee for securities trading.

Specific Business Tax ###:

• Year 2023: 0.055% of the sale value
• From 2024 onward: 0.11% of the sale value

Note: Some individuals, such as those entitled to retirement funds, may be exempt.

Comparing stock taxes internationally

Legal ways for individuals to reduce stock taxes

( 1. Hold stocks longer

Selling stocks after holding for over 1 year usually reduces Capital Gains tax rates, encouraging long-term investment.

) 2. Use Tax Loss Harvesting

If you incur losses on certain stocks, you can offset these losses against gains from other stocks, reducing the overall tax payable.

( 3. Use tax-advantaged accounts

Individuals can benefit from:

• Retirement mutual funds
• Roth IRA accounts )in the US###
• TFSA accounts ###in Canada###

( 4. Plan your sale timing

Choose to sell stocks in years with lower income to reduce overall tax rates.

) 5. Use dividend tax credits (in Thailand)

Individuals can offset withheld taxes against their annual tax liabilities.

6. Take advantage of tax exemptions

Some countries exempt individuals from certain taxes, e.g., the UK exempts up to £12,300 annually.

Investing in foreign stocks and taxes

US Stock Investment

Individuals investing in US stocks should consider:

• Capital Gains: Foreign investors are not taxed on Capital Gains
• Withholding Tax: 30% withholding tax on dividends
• SEC Fee: 0.00051% of sale value

( Hong Kong Stock Investment

• Capital Gains: No tax
• Stamp Duty: 0.13% of transaction value
• Withholding Tax: 10% on H-Share stocks
• Exchange Fee: 0.00077% of value

) CFD (Contracts for Difference) ###

Many individuals choose to sell stocks via CFDs to avoid stock taxes, as CFDs do not impose taxes on stock investments. Advantages of CFDs:

• Can invest in various assets ###stocks, indices, commodities, currencies###
• Use leverage to expand investment capacity
• Trade both rising and falling markets
• Lower fees
• Free demo trading accounts

Summary

Individuals selling stocks in Thailand can avoid capital gains tax, but still incur other taxes such as VAT and Specific Business Tax. Foreign stock investments involve diverse tax systems.

Reasonable tax planning can help individuals increase net returns. The most important thing is to comply with the law and consult tax professionals to pay taxes correctly and safely.