CIT

CIT is a command-line interface designed to calculate the tax liability associated with capital income tax on the buying, selling, and spending of cryptocurrencies, following to the rules and regulations set forth by the Swedish Tax Agency (Swe., Skatteverket).

CIT is a double-nested recursive acronym that stands for CIT's Income Tax with the first CIT represents Crypto Income Tax and is also an acronym from the term capital income tax.

Installation

To set up CIT, the user clones the project locally by running the command git clone https://github.com/vezeli/cit.git. The program does not require installation since the command-line interface (CLI) can be executed directly from a script.

CIT is tested with Python 3.10 or later versions and has dependencies on third-party packages. To install the necessary dependencies, navigate to the project's root directory within a terminal and execute the command python -m pip install -r requirements.txt.

Documentation

Usage

Script cit.py starts the CLI

$ python cit.py --help

which provides three subcommands with their positional and optional arguments:

• $ python cit.py transactions --help - show asset transactions

• $ python cit.py forex-transactions --help - construct asset-denominated FX transactions

• $ python cit.py calculate --help - preform portfolio calculations

The program, by default, reads JSON files relative to the ./input_data directory. If no CLI argument is provided to specify the input file name, the program will read from ./input_data/skatteverket-example-1.json. Optional argument --in is available for specifying the names of the input files.

Input Files

To read transaction data from a JSON file, the file needs to comply with the configuration format specified in config.py. By default, the following information needs to be provided in the JSON file:

• Asset: A string representing the ticker symbol for the currency pair from Yahoo Finance (e.g., BTC-USD, DOGE-USD).

• AssetPriceCurrency: A string with the currency symbol used for pricing the Asset (e.g., USD).

• Transactions: A nested container that stores a list of records (dictionaries) with details about the transactions.

Each record within Transactions should include the following information:

• date: A string indicating the transaction date formatted as YYYY-MM-DD.

• amount: A numeric value representing the quantity of crypto units that were bought, sold, or spent. Positive values indicate buying, and negative values indicate selling or spending.

• market price: A positive numeric value representing the price per crypto unit in AssetPriceCurrency at the time of the transaction.

• exchange rate: A positive numeric value representing the exchange rate between AssetPriceCurrency and domestic currency (_DOMESTIC_CURRENCY specified in the config.py) at the time of the transaction. AssetPriceCurrency is considered the base currency, and the domestic currency is the price currency.

Modes

CIT operates in two modes:

1. When the user provides market price and exchange rate data in the JSON input file, CIT processes the transaction data with the provided information.

2. If market price and exchange rate keys are omitted in the nested Transactions container, CIT automatically retrieves the market data from Yahoo Finance. In this mode, it fetches the so-called mid prices, which are calculated as the average of the opening and closing prices for a given day. It then processes the transaction data, with the fetched market prices, just as it would if the prices were provided in the JSON file.

Skatteverket's Examples

Skatteverket offers hypothetical examples of transaction histories, accompanied by a step-by-step guide that demonstrates how to utilize transaction data for calculating tax liabilities.

The following examples are found on Skatteverket's website:

1. Köp och försäljning av kryptovaluta
2. Köp, försäljning, köp av varor

To replicate these examples, two JSON files, ./input_data/skatteverket-example-1.json and ./input_data/skatteverket-example-2.json, have been created using the provided data which are included as part of the project.

Hands On Examples

In this subsection we provide guidance on processing transaction data using the file ./input_data/skatteverket-example-1.json as an illustrative example. However, the same approach can be applied to process other input files as well.

• For listing all transactions, use the transactions subcommand with positional argument all and optional argument --in:

$ python cit.py transactions all --in skatteverket-example-1.json

• For listing only the buy transactions made during 2021:

$ python cit.py transactions buy --in skatteverket-example-1.json --year 2021

• To summarize and calculate position statistics for the year 2022, use the calculate subcommand:

$ python cit.py calculate summary --in skatteverket-example-1.json --year 2022

• When making a sell transaction, you can calculate the profit and loss (P&L) using the calculate subcommand with the profit-and-loss positional argument:

$ python cit.py calculate profit-and-loss --in skatteverket-example-1.json --year 2022

• For calculating the tax liability in domestic currency from the P&L, use the calculate subcommand with the tax-liability positional argument:

$ python cit.py calculate tax-liability --in skatteverket-example-1.json --year 2022 --domestic-ccy

Typically, you can use the --domestic-ccy optional flag to control the currency in which CIT provides results (asset-denominated or domestic). However, in the current examples, this flag is not relevant because the market prices are denominated in the domestic currency.

• Skatteverket considers buying and selling of asset-denominated currency (e.g., USD) as separate forex trades. To construct a list of FX transaction from the input data, use the forex-transactions subcommand:

$ python cit.py forex-transactions --in skatteverket-example-1.json

It is recommend to go through examples step by step and compare CIT's outputs with the calculations from Skatteverket. This will greatly improve your understanding of how CIT operates behind the scenes and how you can efficiently utilize it.

Known Issues

When using the yfinance library to fetch market data from Yahoo Finance, you may encounter an issue if your application is running behind a proxy. This issue can manifest as an SSLCertVerificationError. To resolve this problem on Windows, you can try installing the python-certifi-win32 library by executing the command pip install python-certifi-win32.

For further details and discussions regarding this issue, you can refer to the relevant GitHub issue.

Disclaimer

This program is not a substitute for professional accounting advice and should not be used as such. You should always seek the guidance of a tax accountant and/or professional for comprehensive and correct tax advice and calculation.