From futures towards crypto derivatives: rethinking the derivatives' taxation methodology

The research subject is the taxation of derivative financial instruments in Russia and foreign countries. In recent years, the field of financial engineering has undergone fundamental changes. In addition to plain vanilla and structured derivatives, crypto derivatives are becoming increasingly widespread. Against the background of a paradigm shift in financial markets, the mechanism of taxation of derivatives in the Tax Code of the Russian Federation is in relative stagnation and does not change. Meanwhile, it is difficult to adapt new financial instruments to the traditional derivatives' taxation methodology that is based on the differences between delivery and settlement derivatives, and speculative and hedging transactions. The research purpose is to systematize the world practice of determining derivatives for taxation purposes and critically assess the feasibility of implementing elements of foreign methodological tools in Russia. The research methodology is a comparative analysis of approaches to the derivatives' taxation in Russia and foreign countries. The article groups the approaches to defining derivatives for tax purposes in world practice and highlights their features and shortcomings. It is established that in Russia the definition of derivatives is borrowed from civil legislation, although a more flexible approach is the one that provides for the allocation of abstract characteristics of derivatives for tax purposes. The author substantiates three abstract characteristic features of derivatives that distinguish them from other financial instruments and transactions. Based on them, a definition of derivatives for tax purposes is given as financial instruments, the value, and payments on which are in a deterministic dependence on the value of one or more stochastically changing basic variables of the underlying asset, which can be replicated and mirror-hedged during its term. The practical significance refers to the substantiating the need to expand the list of underlying assets and the exclusion of the limitation for derivatives without judicial protection from tax legislation.