This article refers to the old Import method. We recommend reading our current article Import of Liquidity Pool/Mining transactions.
Following blockchain importers are covered by this article: AVAX, ETH, BSC, LUNA, MATIC, FTM, TRX
We are working to cover the other blockchain
Per default, the liquidity pool transactions will be imported as taxable events; see (A). You can enable the slider "Import liquidity pool transactions as non-taxable" to get those transactions imported as non-taxable events; see (B).
(A) - Import as taxable events
We split liquidity mining into two operations. In the first process, liquidity is provided and you receive an LP token. In the second process, the LP token is exchanged back for the coin pair and the rewards are claimed.
1) Providing liquidity - funds are added to the liquidity pool
2) Removing liquidity and claiming rewards - funds are removed from the liquidity pool
How are those steps imported into CoinTracking?
1) Providing liquidity
Transactions imported into CoinTracking
- Funds added to the liquidity pool will be imported as "Other Expense"
- The Liquidity Token will be imported as "Income (non taxable)"
Tax implication & transaction details
Coins are exchanged for a token that corresponds to the value of the coins. This is equivalent to a sale and a taxable event occurs.
- The "Other Expense" transactions are taxable events that will occur in the capital gain report
- The Liquidity token will get an internal format with "LP-" as a suffix and a continuous "number"; The recalculation process will get the asset values of the funds moved to the liquidity pool and add the sum as the custom asset value for the liquidity token.
*Please be aware that the asset values will only be transferred, when using our blockchain importers
*Please assign an asset value manually if needed e.g. as described here
2. Removing liquidity and claiming rewards
Transactions imported into CoinTracking
- Funds removed from the liquidity pool will be imported as "Income (non taxable)"
- The liquidity token which will be given back to the liquidity pool will be imported as "Other Expense"
- Fees will be imported as "Other fee"
Tax implication & transaction details
The initially provided coins are bought back with the liquidity token. The value of the liquidity token may have increased due to the asset values it holds and the rewards claimed. This increase will be handled as a sale and therefore as a taxable event.
- The "Income (non taxable)" transactions are not taxable and won't appear in the capital gains report
- The recalculation process will get the asset values of the funds removed from the liquidity pool and add the sum as the custom asset value for the liquidity token; The "Other Expense" transaction is a taxable event that will occur in the capital gain report
*Please be aware that the asset values will only be transferred, when using our blockchain importers
*Please assign an asset value manually if needed e.g. as described here
(B) Import as non-taxable events
We split liquidity mining into two operations. In the first process, liquidity is provided and you receive an LP token. In the second process, the LP token is exchanged back for the coin pair and the rewards are claimed.
1) Providing liquidity - funds are added to the liquidity pool
2) Removing liquidity and claiming rewards - funds are removed from the liquidity pool
How are those steps imported into CoinTracking?
1) Providing liquidity
Transactions imported into CoinTracking
- Funds added to the liquidity pool will be imported as "Expense (non taxable)"
- The Liquidity Token will be imported as "Income (non taxable)"
Transaction details
Coins are exchanged for a token that corresponds to the value of the coins.
- The "Expense (non taxable)" transactions are non-taxable events
- The Liquidity token will get an internal format with "LP-" as a suffix and a continuous "number"; The recalculation process will get the asset values of the funds moved to the liquidity pool and add the sum as the custom asset value for the liquidity token.
*Please be aware that the asset values will only be transferred, when using our blockchain importers
*Please assign an asset value manually if needed e.g. as described here
2. Removing liquidity and claiming rewards
Transactions imported into CoinTracking
- Funds removed from the liquidity pool will be imported as "Income (non taxable)"
- The liquidity token which will be given back to the liquidity pool will be imported as "Expense (non taxable)"
- Fees will be imported as "Other fee"
Tax implication & transaction details
The initially provided coins will be received back in exchange for the liquidity token. Rewards will be calculated based on the difference between the coins you provided and get back from the pool.
- The "Income (non taxable)" transactions are not taxable; The cost basis will be transferred from the funds added to the pool in the tax report
- Rewards will be imported as "Income" and will appear in the Income report of the tax report
- The recalculation process will get the asset values of the funds removed from the liquidity pool and add the sum as the custom asset value for the liquidity token; The "Expense (non taxable)" transaction is a non-taxable event.
*Please be aware that the asset values will only be transferred, when using our blockchain importers
*Please assign an asset value manually if needed e.g. as described here
Depending on the country you are taxable in, there may be other rules already in place. Please always discuss the tax treatment with your tax advisor.
To track the impermanent loss manually as it is not possibly right now to track this automatically you could use "other fee" or "spend" for example. On the gain side you could use "income". It is important to add this in FIAT currency like EUR or USD as otherwise you coin balance will be affected.