You are supposed to do it when your profit exceeds the non-taxable minimum, also called personal allowance. I'm talking here about countries where it's taxable, because in some countries like Germany and recently Belarus you don't have to pay anything.
You do it once a year and usually the transfer from an exchange to your bank account is the only proof that you'll need (in case they ask) you don't have to attach it to your annual report. You also can keep emails from the exchange with dates that show when you've deposited and withdrew your money.