Our app handles fees in the following manner:
Fees Paid in Local Currency:
If you pay a fee in your local currency (e.g., USD, EUR), it is added to the cost basis of that trade.
Fees in the Same Cryptocurrency Sold:
If you sell a cryptocurrency and the fee is charged in the same cryptocurrency, the fee is added to the cost basis of that cryptocurrency.
Fees Paid in the Cryptocurrency Being Bought:
When you sell one cryptocurrency for another and the fee is paid in the currency being bought, the fee is carried forward and added to the cost basis of the future sale of that currency.
Fees in a Third Cryptocurrency:
If you swap one cryptocurrency for another and the fee is paid in a third cryptocurrency (e.g., swapping UNI/DAI with an ETH gas fee), the fee is added to the cost basis of the current trade.
Fees on Transfers:
Fees related to transfers that cannot be directly linked to a trade are recorded as miscellaneous expenses.
Carrying forward the "buy" fee
Why You Might Not See the Fee on the Trade Itself
In some cases, the fee isn't immediately "realized" in your account. This is particularly true for crypto-to-crypto trades where the fee is in the currency you're acquiring.
The Logic Behind Carrying Forward "Buy" Fees
Many tax agencies view crypto-to-crypto trades as two separate transactions: selling one cryptocurrency for fiat and then buying another with that fiat. To align with this perspective, we assign the "buy-side" fee to the acquired cryptocurrency. This approach is supported by recent guidance from tax authorities like the UK's HMRC, which emphasizes the need for a fair methodology in assigning fees during crypto swaps.
Handling Miscellaneous Fees
As mentioned in point 5, fees related to transfers and smart contract interactions are treated separately. Their eligibility as deductible expenses is uncertain, and HMRC has explicitly stated that such fees cannot be claimed.
Until further guidance is available from other tax authorities, these fees are categorized as miscellaneous expenses in our app. We recommend consulting your tax professional for guidance on how to handle them.
Missing Fees
In rare cases, fees may not appear in your transactions. This can happen due to:
Missing data from the exchange (most common).
Changes in the exchange's CSV format.
If you suspect missing fees due to CSV format changes, please contact our support team with:
The name of the exchange.
A sample of the new CSV format.
We will investigate and update our systems accordingly.
FAQs
Can fees be used to reduce my taxable income?
Whether fees can be used to reduce your taxable income depends on the specific tax laws and regulations applicable to your situation. In many cases, certain fees—such as business expenses, professional fees, or investment-related costs—may be deductible if they meet the necessary criteria set by tax authorities. However, tax rules can be complex and vary by jurisdiction, so it’s always best to consult a qualified tax professional to receive personalised advice and ensure compliance with the latest tax laws.