How to Report Crypto Taxes on eToro

Importing and handling transactions from eToro for tax purposes differs slightly from other exchanges. One of the reasons for this is that eToro offers both non-leveraged crypto trading and the ability to go long or short with up to 2x leverage (CFD trading). These two types of trading must be considered differently regarding tax calculations and will be explained in detail in this guide.

Export your eToro transaction history

The first thing you will need to do is to export the entire transaction history from eToro as an XLSX file. The Excel file should contain five sheets in total – do not edit or delete any of these! This file will include all information about every trade and transaction you have made on eToro during the period selected for the export. You are limited to exporting transaction history for up to one year in each file. You must export files for multiple years if you have traded on eToro for over a year.

It’s important to know that this file includes transactions with stocks, commodities, and ETFs. Coinpanda will import the profits and losses for all transactions, including stocks, other asset classes, and cryptocurrencies.

Here is how to export the XLSX file from eToro:

1. Log in to your eToro account and navigate to ‘Portfolio’
   (https://www.etoro.com/portfolio)
2. Select ‘History’ in the top menu
3. Click on the Settings icon (top-right corner)
4. Click on ‘Account Statement’ in the dropdown menu
5. Select your time frame and click ‘Create’
6. Click the Excel icon in the top-right corner to download the file
7. Upload the XLSX file to Coinpanda

Non-leveraged trades

eToro allows you to trade crypto in two ways:

1. Non-leveraged trades (long only)
2. Leveraged positions up to 2x (both long and short)

When you open a non-leveraged trade, you buy the cryptocurrency similarly to other exchanges like Coinbase or Binance. If you have $500 in your account, and the Bitcoin price is currently $50,000, you can buy a maximum of 0.01 BTC. These coins can now be transferred from the eToro trading platform to your eToro wallet. After receiving BTC in your eToro wallet, you can send it to any other exchange or an external wallet such as Ledger, Trezor, or Exodus.

If you buy crypto on eToro and then send it to another wallet or exchange where you sell your coins later, you need to track the original cost basis from when the coins were purchased on eToro originally. Coinpanda tracks this automatically by analyzing the Excel file and extracting which transactions are non-leveraged trades and whether they are transferred out of eToro.

Example 1

You buy BTC for $500 on December 23rd and then transfer this to your Binance account (via eToro wallet) on January 5th. The image below shows that this will now appear in Coinpanda as two transactions. As you can see, the BTC purchased takes on a cost basis of $500 and is considered similar to any other ordinary crypto purchase.

Example 2

You buy 23 LINK tokens worth $800 on February 20th before you sell all the tokens almost three months later on May 10th, 2021. The price of Chainlink has increased since you originally bought the coins, and you end up with a total profit of $396. The image below shows that this will now appear in Coinpanda as two transactions.

Leveraged positions

As mentioned, eToro allows you to open margin positions with leverage up to 2x. You can go either long (buying the asset) or short (selling the asset). The tax treatment of margin/leveraged positions differs from buying crypto non-leveraged (spot buy). The simple explanation is that instead of calculating the realized gain/loss by looking up the initial purchase price according to the cost basis method used (FIFO, LIFO, ACB, Share Pool, etc.), you need to consider the closed profit or loss for the trade or position in isolation.

This might sound complicated, but we can explain it using a simple example: You have only bought crypto on Coinbase until now, and then you decide to open an eToro account to short Bitcoin. On Coinbase, you have bought BTC on one occasion only. These are all your transactions with Bitcoin until today:

Following the FIFO principle, we need to calculate the initial purchase price of the 0.2 BTC sold on April 10th. But this cannot be done since you have only bought 0.1 BTC before this date, not to mention that you still have 0.1 BTC in your Coinbase account after selling 0.2 BTC on eToro! As you probably now understand, we cannot apply the same calculation principle for short selling as for spot trading since we are selling coins that were never bought in the first place. The same goes for short and long positions when trading on margin or with leverage.

We have written an in-depth article about the taxation of cryptocurrency margin trading on our blog if you want to learn more about this topic: How to Report Taxes on Cryptocurrency Margin Trading

Coinpanda will consider the closed profit and loss from leveraged positions on eToro if you import an Excel file that contains such trades. That means if you went long 2x on eToro and made a profit of $250 after closing the position, this will be imported as a trading gain transaction of $250 in Coinpanda, and the total amount will be considered as realized capital gains.

However, if you went 2x long and the trade resulted in a $400 loss, this transaction will be imported as a trading loss of $400, and the total amount will be considered a realized capital loss.

This is how this will look on Coinpanda:

If you only made these two trades on eToro during a single tax year, you will report a net capital loss of $150 which can be used to offset other capital gains (and possibly other income).

eToro spread

One feature that separates eToro from other trading platforms is that you are not paying any fees directly when buying or selling cryptocurrencies. Instead, eToro operates with what they call spread which is the difference between the Buy and Sell price. This means your position will be at a loss immediately after buying the cryptocurrency, equaling the spread you paid.

This spread is also referred to as the broker fee by eToro, which means it could be seen as a fee directly associated with the transaction rather than the buy and sell spread similar to other spot exchanges. Transaction fees are generally considered deductible costs and can be included in the cost basis of the asset bought and will offset your capital gains.

Whether or not the tax authority in your country will consider the spread on eToro as a transaction fee or simply as a spread instead is unclear. When uploading the eToro XLSX file to Coinpanda, the spread for every transaction will always be included as a transaction fee since we believe this is the most accurate tax treatment for these costs. However, suppose you believe these costs are not tax-deductible. In that case, you can simply delete all the values in the Spread column in the Closed Positions sheet before uploading the XLSX file to your eToro wallet on Coinpanda.

Rollover fees

You will pay a small rollover or overnight fee when you hold a CFD position overnight. This fee applies to all CFD markets on eToro, including cryptocurrencies and stocks. Coinpanda will automatically detect the rollover fees deducted from your balance and import the transactions as Margin Trading Fees. The total fees paid will be included in your tax summary so that you can report these as deductible costs in your tax return if allowed by the tax authority in your country.

Staking, interest, and airdrops

If you hold certain cryptocurrencies, such as Cardano (ADA), you might also qualify for receiving staking rewards. Generally, cryptocurrency received as staking rewards will be considered income for tax purposes and should be reported in your tax return. Luckily, Coinpanda will import all staking rewards received on eToro and include the total amount in your tax reports. The same applies to interest payments and airdrops, which under certain circumstances, might be paid out by eToro.

Summary

During the last couple of years, eToro has become a wildly popular trading platform also for cryptocurrency traders. Whether you have made a gain or loss from your trading, it’s important to understand the tax implications and how to calculate and report your capital gains correctly.

Because eToro offers both non-leveraged trading and leveraged positions, transactions on eToro need special consideration regarding tax calculations. We explained that non-leveraged trading should be considered similar to ordinary trading on any other exchange by calculating the capital gains according to cost-basis rules such as the commonly used FIFO. On the other hand, leverage positions must be considered quite differently, and the FIFO principle cannot be used similarly.

Coinpanda is one of very few crypto tax software solutions that can do tax calculations for trading on eToro correctly today. All you need to do is export an Excel file from eToro that contains all your historical transactions and then upload the file to the Coinpanda platform.

You can sign up for a 100% free account or read more about how the software can help you report your crypto taxes. Coinpanda supports over 65 countries today, including the US, Canada, Australia, the UK, and almost all other European countries.