Switzerland Crypto Tax

Switzerland is home to the famous Crypto Valley, which is gradually becoming a global hub for future-oriented DLT business technologies. Crypto companies are attracted by a positive government approach, advanced and favorable legislation, as well as a fair and effective taxation system.

Another notable advantage is that Switzerland has concluded double taxation agreements with about 100 countries, allowing taxpayers to protect their tax revenues in two different countries. Moreover, they can also eliminate double taxation of wealth, inheritance and, in some cases, allow taxpayers to reduce import taxes.

Taxation in Switzerland is generally administered by the Federal Tax Office (FTA), the cantons and the municipalities. Each canton has a different tax framework, which means that tax rates will vary depending on the location you choose for your crypto company. However, in terms of timing, they remain almost unchanged – the tax year corresponds to the calendar year throughout Switzerland, and most cantons require that tax returns be submitted by 31 March.

For tax purposes, the FTA classifies cryptocurrencies as assets rather than fiat money, making them similar to financial securities (e.g. equities or bonds).

Based on the guidance from the Swiss Financial Market Supervisory Authority (FINMA), the FTA distinguishes the following categories of cryptocurrencies:

• Native tokens such as Ether and Bitcoin (used as a method of electronic payment)
• Asset-backed tokens (issued during the initial offering stage to raise funds and grant rights (e.g. voting) to the holder as per the issuer’s contractual obligations) and their subcategories
  • Debt tokens obligating the issuer to repay all or part of the investment and pay interests
  • Equity tokens don’t obligate the issuer to repay the investment but the holder is entitled to a cash payment which is measured by a certain ratio to profit and/or liquidation result
  • Participation tokens don’t obligate the issuer to repay the investment but the holder is entitled to a proportional share of a certain reference value of the issuer (e.g. sales)
• Utility tokens (instead of granting pecuniary rights to the holder in the case of the issuer’s corporate success, they grant the holder the right to use digital services, which are mostly provided on a specific DLT platform)

Companies engaging in the activities related to the above-mentioned crypto categories might be subject to the following taxes applied at the federal, cantonal or communal levels:

• Corporate Income Tax – 12%-21%
• Capital Gains Tax (CGT) – 0,001%-0,5%
• Value Added Tax (VAT) – 7,7%
• Withholding Tax (WHT) – 35%
• Social Security Contributions – 0,5%-5,3%
• Issuance Stamp Duty – 1%

While federal tax rates are stable, cantonal tax rates are determined annually and can be accessed on each canton’s official website.

Some of the latest crypto taxation guidelines for the most common transactions of native tokens, debt tokens, utility tokens and asset-backed tokens can be found in the working paper titled Cryptocurrencies and Initial Coin/Token Offerings (ICOs/ITOs) as Subject to Wealth, Income and Capital Gains Tax, Withholding Tax and Stamp Duty, published in 2021 by the FTA.

Corporate Income Tax

Based on the Swiss taxation framework, the Corporate Income Tax consists of the following parts:

• Federal Corporate Income Tax
• Cantonal Corporate Income Tax
• Communal Corporate Income Tax

Federal corporate income tax is levied at 8.5% of net profit. The cantonal corporate income tax and the communal corporate income tax are very different in each canton as they all have different tax systems. If you want to understand which Swiss location is most favourable for your crypto business, the team of the Regulated United Europe (RUE) will be happy to provide personalized advice.

The FTA working paper highlights the following aspects of income tax related to the tax treatment of indigenous tokens:

• Simply storing tokens purchased through cryptographic exchanges in the form of purely digital means of payment normally does not generate any income or income that is taxable
• Capital gains from token sales are considered commercial and taxable
• Loss to be deducted from tax upon submission
• If a mining service or riveting of native tokens is compensated with native tokens, it is considered a source of income and is therefore taxed
• Direct income costs required in the context of asset management can be deducted from income
• Transaction costs directly related to acquisition, transfer or sale of assets are not deductible

Tax treatment of equity tokens:

• Funds raised by issuing equity tokens are considered taxable income and must be recorded as income in the issuer’s income statement
• If the issuer has made a contractual commitment to complete a particular project, the activity may be declared as an expense, thus reducing the taxable income
• Payments to token holders based on their entitlement to a certain share of profits and/or liquidation shall be considered tax-free expenses, provided that the holders are specified at the time of payment, that the issuer’s shareholders do not have more than 50% of the issued tokens and that the payments to the holders of the tokens do not exceed 50% of the profit up to interest and taxes

These are just a few examples of the Swiss taxation system. If you are looking for exhaustive tax advice on any of the categories of cryptocurrencies, feel free to contact us, and we will send you an individual offer.

Value Added Tax

Transactions, including exchange, of native tokens aren’t subject to VAT as this category of cryptocurrencies qualify as a means of payment and can be treated as fiat money. Any commissions or fees charged in connection with this sort of transaction are considered fees for financial services, which are VAT exempt without credit.

However, transactions of other categories of cryptocurrencies might be subject to VAT due to their different functionalities and purpose of use (e.g. provision of a particular service).

Issuance Stamp Duty

In many cases, cryptocurrencies (such as native tokens, debt and equity tokens) are exempt from the Brand Issue Fee, but some categories of cryptocurrencies and specific events may bear tax fees.

For example, if a securities dealer in Switzerland, as defined in the Stamp Duty Act, is a party or acts as an intermediary, secondary market transactions in debt tokens may be subject to a transfer tax (up to 0.15%).

Tax Rates in the Crypto Valley

The Crypto Valley, probably the largest and the most mature DLT ecosystem, is based in the canton of Zug which boasts attractive tax rates and has a positive stance towards the cryptocurrency-related businesses which is demonstrated through the effective regulatory framework.

Crypto companies planning to operate in the Crypto Valley should take note of the following aspects:

• VAT isn’t levied on transactions of native tokens (e.g. Bitcoin)
• Corporate Income Tax is proportional (up to 15.1%)
• Salaries paid in cryptocurrency are subject to the Income Tax (approx. 23%) which must be reflected in the salary statement
• Taxes can be paid in cryptocurrency

In conclusion, although the Swiss jurisdiction is among the most favourable for crypro businesses, navigating its taxation framework might feel like wandering through a maze. If you’re determined to succeed but aren’t sure where to start, highly qualified and experienced consultants of Regulated United Europe (RUE) will be pleased to assist you.

We very well understand and closely monitor crypto-specific Swiss taxation rules and thus can guide you through the peculiarities. Moreover, we’re more than happy to assist you with the company formation, crypto licensing in Switzerland, crypto regulations in Switzerland and accounting. Book a personalised consultation now.

Crypto Taxes in Switzerland in 2023

In 2023, Switzerland remains one of the most welcoming countries for crypto businesses that can have plenty of flexibility related to standard tax rates, allowances, and exemptions. Cryptocurrencies are still considered private assets (in the same category as bonds and stocks) and not legal tender, except for VAT purposes where they’re treated as alternative means of payment. While cantonal and communal tax rates have changed to some extent, the federal taxes largely remain the same.

Corporate Income Tax

Although at the federal level the Corporate Income Tax is, as usual, imposed at the flat rate of 8.5%, it can easily reach 12-21% when you sum up communal and cantonal taxes. Lower corporate taxes are imposed in the canton of Zug, home to Crypto Valley, which has a tax rate of 11.9%, and cantons of Nidwalden and Lucerne where the rates are 12% and 12.2% respectively.

However, in many cases, it’s still not levied on particular crypto-related activities. For instance, the holding of native tokens acquired through crypto exchanges in the form of digital means of payment doesn’t generate any taxable income. But if mining or staking of native tokens is compensated with native tokens, it’s already considered a source of income that’s subject to tax.

Net Wealth Tax

The Net Wealth Tax remains one of the most common cantonal taxes levied on cryptocurrencies, which are taxed based on their market value. Every canton applies a local rate and has its own system of collecting the tax, which is why it differs between cantons significantly. For example, Zurich continues to collect the tax in accordance with the type of residence permit, marital status, and annual income that determines the tax band. Single taxpayers aren’t subject to paying the tax if their annual income doesn’t exceed 77,000 CHF (approx. 77,800 EUR) but can be required to pay as much as 5,584 CHF (approx. 5,640 EUR) if their annual income is over 3,158,000 CHF (approx. 3,191,000 EUR). The thresholds are slightly higher for married people.

Capital Gains Tax

The rate of the federal Capital Gains Tax is up to 7.8% and applies to self-employed crypto traders and businesses for whom the tax is levied on profits from selling or trading crypto. Private investors don’t have to pay the tax for their personal wealth assets.

An individual is categorised as a private investor if:

• They’ve held their crypto assets for at least six months
• Their trading turnover is five times smaller than their holding at the beginning of the financial year
• Their net capital gain is smaller than 50% of the total income throughout the financial year
• There’s no debt financing
• The derivatives are used only for hedging

Value Added Tax (VAT)

Throughout the year 2023, the standard rate of 7.7% will apply. However, since for VAT purposes transactions of native tokens are treated as a means of payment, such activities as crypto exchange are VAT-exempt. Also, all commissions or fees charged for cryptocurrency transactions are classified as fees for financial services, which are also VAT-exempt. On the other hand, transactions of other cryptocurrency categories can be subject to VAT if their purpose of use is considered a sale of a taxable product or a service.

Issuance Stamp Duty

The rate of the Issuance Stamp Tax (or Capital Duty) remains imposed at a rate of 1% of the market value of the capital contribution. An exemption applies to the first 1 mill. CHF (approx. 1,01 mill. EUR) of equity in exchange for ownership rights, whether made in an initial or subsequent contribution.

Securities Transfer Tax

Native tokens, debt, and equity tokens remain tax-exempt, but if, for example, a securities dealer, as defined in the Stamp Duty Act, is a party or acts as an intermediary, secondary market dealings in debt tokens can be subject to the Securities Transfer Tax of up to 0.15%.

Since cantonal as well as communal tax rates vary pretty widely, and are determined and published on the cantonal websites annually, we highly recommend booking a personalised consultation with us to do a deep dive into the taxation system of the canton you’re interested in.

New Global Tax Transparency Framework

Since Switzerland is a member of the ​​Organization for Economic Cooperation and Development (OECD), it’s obligated to transpose the organisation’s recommendations and policies into Swiss legislation. The OECD has recently introduced a new international tax transparency framework, entitled Crypto-Asset Reporting Framework (CARF), which should ultimately raise crypto taxation and tax reporting standards by eliminating crypto-related tax inconsistencies and administrative siloes across its member countries. In response to the rapid adoption of cryptocurrencies, the OECD is essentially proposing automatic tax reporting and taxpayer information sharing between international authorities.

The CARF standards will apply to companies and individuals that provide services related to crypto-to-crypto, crypto-to-fiat-money, and fiat-money-to-crypto exchange transactions for or on behalf of customers, cryptocurrency transfers (including retail payment transactions) and it may soon apply to online and offline crypto wallets. Every liable person will be required to report tax-related information to the relevant national authorities, who’ll then exchange the information on crypto transactions and taxpayers with foreign tax authorities. These rules exclude cryptocurrencies that aren’t used as a means of payment or as an investment, as well as centralised stablecoins.