If you're trading in overseas forex, you'll definitely lose out if you don't use cashback. However, many people probably have questions like the following: What exactly is cashback? What should I do to get the most out of it? Are profits from cashback taxed? This article answers these questions and explains points to consider when choosing a site. It's written in an easy-to-understand way even for beginners, so please use it as a reference! Contents 1 Advantages & Disadvantages of Overseas Forex Cashback Sites / How to Choose 1.1 What are overseas forex cashback sites? 1.2 Profits from cashback are taxed (tax return required) 1.3 It's important to choose from overseas forex brokers you want to use for trading 1.4 Check if there is direct cashback 1.5 Choose a trustworthy cashback site 2 Summary Advantages & Disadvantages of Overseas Forex Cashback Sites / How to Choose In short, overseas forex cashback is a service that gives money back to users. You can receive money when opening an account or making a deposit, depending on the amount you trade. There are two types of cashback: Direct cashback: A bonus unique to the overseas forex broker. Indirect Cashback: Bonuses from cashback sites (companies that specialize solely in cashback). The former involves receiving money not as cash but as margin for trading, such as account opening bonuses and deposit bonuses. The latter involves cash being directly deposited into your account. Everything offered by cashback sites falls under this "indirect cashback." What are overseas FX cashback sites? Simply put, a "cashback site" is like an agent for overseas FX brokers. When you open an account through the site, the overseas FX broker pays the cashback site a referral fee. Depending on the trading volume of the site user, the cashback site receives money from the overseas FX broker each time. A portion of the money earned is then returned to the site user as a bonus. This cashback can be received with every trade. To trade as profitably as possible, it is necessary to deepen your understanding of cashback. It is sufficient to understand that using cashback can reduce fees. Those with knowledge of overseas FX may find it easier to understand if they think of it in terms of spreads, as shown below. Example: If you can receive a $3 cashback per lot (100,000 currency units) You can receive $3 in cash for each lot traded. If the spread is 1.0 pips, then $3 will give you a cashback of 0.3 pips. The cashback will reduce the spread to (1.0 - 0.3) pips, effectively making the spread 0.7 pips. This is the logic that cashback can narrow the effective spread. Why do they offer cashback? Why do overseas FX brokers offer cashback to their users? At first glance, it may seem like they are just handing out money. However, in reality, by introducing a cashback system, the broker and the user have a win-win relationship. In conclusion, overseas FX brokers make money from the fees incurred for each trade. The more users there are, the greater the total trading volume, and the more fees the broker can receive from users. It is correct to understand that brokers offer cashback in order to attract more users. They are happy if giving back to users, even a little, encourages more people to "try FX!" You might feel suspicious about getting money just for trading, but rest assured that the companies are doing this to make a profit. However, cashback profits are subject to tax (you need to file a tax return). Cashback is a great service that gives you money back for each trade, but if there's one downside, it's that the money you earn is taxable. Bonuses from cashback sites are deposited directly into your account as cash. Since you can withdraw the deposited money from your account as cash, it's considered profit from FX trading. As a result, you need to declare the cashback profits when filing your tax return. Just like profits from FX trading, it's treated as taxable income, so be careful. Profits from overseas FX (including cashback) are subject to comprehensive taxation as miscellaneous income. The tax rate for comprehensive taxation is determined by a progressive tax system (7 levels from 4% to 45%). The more profit you make, the higher your taxes will be, so be sure to check your profits carefully. On the other hand, bonuses from FX brokers themselves are generally not subject to taxation. This is because they are only distributing margin or awarding points, not actually handing out cash. It is important to choose an overseas FX broker that you want to use for trading. Avoid choosing an overseas FX broker based solely on cashback. Even if a site seems to have a good cashback rate, its spreads may be wider than other companies. You should choose a cashback site in the following steps: Choose the broker you want to use. Choose a cashback site that handles the overseas FX broker you have chosen. Compare the cashback rates and narrow it down to one. The most important thing is not to lose money in trading. Don't be fooled by temporary campaigns or high cashback rates offered by FX brokers. It is important to choose a cashback site based on the overseas FX broker you want to use, or an overseas FX broker that you can trust. You can open additional accounts even with overseas FX brokers you are already registered with. If a broker allows you to open multiple accounts, you can open a new account with the same broker through a cashback site. (Even if you already have an account with that broker, you can open an additional one.) Some brokers only allow you to open one account (such as iFOREX), so if you are just starting out with FX, we recommend that you check the following two points before opening an account. Number of accounts that can be opened... Continue reading What is overseas FX cashback? A complete guide to choosing a cashback site, disadvantages, taxes, etc.