QUESTION: Taxes in investing: how to account for losses and netting?

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Accounting for losses and financial result netting is a crucial mechanism for optimizing taxes on investments, allowing investors to significantly reduce their taxable base for transactions with securities and derivative financial instruments. The netting procedure itself is the process of offsetting losses from certain investment operations against income received from other operations within the same tax period.

To successfully apply this scheme in practice, you need to go through several key steps step by step. Here is a detailed algorithm of actions for an investor:

1. Determine your current standing and collect all reports from brokers and asset managers for the expired calendar year to get a complete picture across all your accounts and brokerage companies.

2. Set a success metric by evaluating the total amount of losses incurred on certain instruments, such as shares of foreign companies, and comparing them with profits on others, say, bonds or Russian stocks.

3. Choose instruments for netting, remembering that losses on publicly traded securities are netted against profits on the same securities, and also take the derivatives market into account.

4. Set a deadline: all operations to fix losses or profits must be completed before the end of the last trading session of the calendar year, i.e., before December 31.

5. Automate regular actions by setting up monthly monitoring of the financial result in your trading terminal or investment app so that you do not have to do all the work in a rush at the end of the year.

It is worth noting that in most cases, the broker acts as a tax agent and performs all calculations and withholdings independently at the end of the year or upon withdrawal of funds. However, if you have accounts with different brokers, you will have to net losses with one broker against profits with another independently by filing a 3-NDFL tax return with the Federal Tax Service.

QUESTION: Taxes in investing: how to account for losses and netting?

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