Tax and record keeping for traders: what to keep, what to ask

This page states no rule, rate, threshold, allowance or deadline for any country. It is not tax or legal advice. The answers belong to the tax authority where you are resident and to a qualified adviser who knows your situation.

What it offers is the part that is the same everywhere: an account of the records a trader generates, why each matters, and the questions whose answers differ by country.

Tax law is national, and each country has made its own choices. The differences are not details. They are differences of kind.

• What a gain is. The same result may be treated as income, as a capital gain, as something else, or not taxed at all, and the treatment may depend on how often a person trades or whether it is their occupation.
• What the product is. A spot position, a contract for difference, a future, an option and a share may each fall under a different rule.
• When a gain counts. Some systems count a gain when a position is closed, some value open positions at the end of the year, and some look at other events.
• What happens to losses. Whether a loss can be set against gains, against other income, or carried to another year varies widely.
• Who the person is. Residence, employment, trading through a company and holding an account abroad can each change the answer.

Whatever the rule, it will be applied to facts. These are the facts, and all of them exist at the moment a trade is made. They are far easier to keep than to rebuild.

• Account statements, for every period, as issued by the provider. They are the primary record, and everything else is checked against them.
• For each trade: the instrument, whether it was a buy or a sell, the size, the date and time it was opened and closed, and the price at each.
• The result of each trade in the currency of the account.
• Costs, separately: the spread where it is shown, commission, overnight financing charged or credited, and any other fee. Costs are often treated differently from gains and from one another.
• Deposits and withdrawals, with dates, amounts and the method used. Money moved in or out is not a gain or a loss, and the record is what shows it.
• Currency conversions: when the account, a deposit or a withdrawal is in a currency other than the one you report in, the date, the amounts on both sides and the rate applied.
• Corrections and adjustments made by the provider, such as a dividend adjustment on an index or a rollover adjustment, with the provider’s own description.
• Related expenses you might be asked about, such as data, software or equipment, with receipts.

Download statements when they are issued, and keep them as issued. An account that is closed, or a provider that changes its systems, may no longer offer old periods. Keep a second copy somewhere other than the device you trade on.

Keep your own running record beside them: a spreadsheet or a journal with one line to a trade. It is not a substitute for the statements. It is the index to them, and it is the place to note what a statement does not show, such as why a withdrawal was made.

Reconcile the two from time to time: the opening balance, plus deposits, less withdrawals, plus or minus the results and costs, should arrive at the closing balance. A difference found within a month is quickly explained. One found years later may not be.

How long records must be kept is itself a rule that differs by country, and is one of the questions below.

A trader whose account is in one currency and whose tax return is in another has a second set of figures to produce. The result of a trade in the account’s currency has to be expressed in the reporting currency, and exchange rates move.

Countries differ on which rate is to be used: the rate on the day of each trade, an average for the period, the rate on the day money was brought home, or a rate the authority itself publishes. The choice can change the reported figure, as the example below shows.

The practical point is to record dates and amounts in the original currency for everything. With those, any method can be applied afterwards. Without them, none can.

These are the questions whose answers this page cannot give. Taking them, with your records, to a qualified adviser or to your tax authority is the purpose of keeping the records.

• Where I live, how is a gain from the products I trade treated, and does it depend on how often I trade?
• When is a gain or a loss counted: at the close of a position, at the end of the year, or at some other point?
• Can a loss be set against gains or other income, or carried to another year, and must it be declared to be kept?
• How are costs treated: spreads, commission, overnight financing, data and software?
• Which exchange rate do I use to convert, and from which source?
• Are my provider’s statements enough as evidence, or is something more needed?
• Must I report an account held with a firm abroad, even in a year with no gain?
• Which records must I keep, in what form and for how long?
• When and how do I declare, and when is payment due?