How are Cryptocurrencies Taxed in Switzerland?
It is not a secret to anybody that Switzerland is the leader among ecosystems for digital coins. Such a positive environment has appeared due to a number of reasons – “crypto valley” in Zug, development-oriented regulations, and welcoming attitude.
However, one of the most important reasons is the favourable tax laws. Let’s see what kind of taxation exists in one of the most crypto friendly countries.
Generally, digital coins are perceived as cash or movable assessable assets, therefore, they are subject to a wealth tax and have to be listed in the "Schedule of Securities and Assets" in the Swiss tax return.
The ways how holdings of digital coins are valued were suggested by both cantons of Luzern and Zug. For this purpose, the average year-end rate for a certain currency determined by SFTA should be utilized. If the rate is not published, the price of the currency is utilized.
Capital gains tax
As movable assets are free of capital gains tax, crypto coins are not taxed in this case as well. If we pay attention at the other countries, we can notice why Switzerland is considered to be a friendly one for crypto enthusiasts. For instance, taxes on gains in Great Britain can be up to 45%, in Canada this number can reach 50%, while in Japan the taxes can be up to 55%. Capital gains tax also exists in U.S. and Australia.
Digital coins fall under income tax in a few cases. First, if somebody is a professional trader and trades in BTC, ETH or other coins, in this case, gains are perceived as a self-employed income, and fall under the income tax.
If, however, the person is not qualified as a professional trader, the amount of coins in his possession is declared as a total wealth. It is important to remember that professional traders and individual investors pay taxes differently, and various factors are considered for the final tax determination for everyone.
Also, if the salary is paid in crypto coins, these earnings are taxed as well. In case any provided service is paid with crypto coins, the earnings fall under the category of income, too, and are taxed. However, it is important to keep in mind that although these taxes exist, they are relatively low. For instance, in Australia, if a business receives BTCs as a payment for a service, it has to pay a tax equal to amount of received BTC.
Talking about mining, all profits received this way are considered income and fall under income tax.
One of the important indicators of crypto environment is the VAT tax. In Switzerland, BTC and other coins are not taxed in this case.
The explanation is that Swiss authorities do not think of transferring BTC as of delivery of goods or services. They believe that BTC is just a payment method similar to the country’s fiat – Swiss francs. Therefore, transactions and transaction fees for exchanges are free of VAT.
If we compare Switzerland with other countries, we can make sure that its taxation policy is friendly again. In Great Britain, for instance, VAT will be due in the normal way when crypto coins are used to buy goods and services.
What about ICOs?
Talking about issuing tokens in Switzerland, they are categorized into three types: assets, payment tokens and utility ones.
Generally, Swiss tax law does not have any specific determined guidelines for tokens. Usually, tax rules that apply to financial instruments more closely associated with this or that token should be followed.
This way, equity tokens follow rules for equity instruments, and utility tokens can fall under VAT tax.
Welcoming attitude, crypto friendly environment and the taxation policy encouraging crypto development can serve as an explanation why Switzerland is truly considered the leading DLT country.