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.