Source: CryptoTax Calculator
In 2022, Switzerland made changes to how they tax and treat cryptocurrency assets.
In this guide, we’ll go through the different tax treatment of cryptocurrencies in the Swiss landscape. It will explore payment tokens, investment tokens, utility tokens, and the different implications of transacting with each. This guide will detail points of note for individual investors.
Payment tokens
What is a payment token?
As defined by the Switzerland government, payment tokens are digital rights-values which, depending on their distribution and the infrastructure available, can be used as means of payment. The issuer has no obligation to make any particular payment or provide any service to the investor.
How does Wealth Tax apply to payment tokens?
Payment tokens in the form of cryptocurrency are assessable, movable, and intangible assets which, under Swiss tax law, are part of movable capital. These assets are therefore subject to cantonal wealth tax and must be declared at market value at the end of the tax period. In the absence of a market value, the payment token must be declared at its initial purchase price converted into Swiss francs.
How does Income Tax apply to payment tokens?
In Switzerland, holding cryptocurrency assets does not in principle generate income or returns subject to income and/or withholding tax. However, if any salary or salary benefits are paid to an employee in the form of cryptocurrency assets, these would be taxable as income from gainful employment.
The amount to which income tax will be applied is the value at the time of receipt, converted into Swiss francs.
For tax purposes, the purchase and sale of payment tokens are assimilated to transactions carried out with traditional means of payment.
The resulting profits or losses are therefore, in the context of the private wealth, non-taxable capital gains or non-deductible capital losses. In this case, the capital gains resulting from the alienation of payment tokens are deemed to have been made in a professional capacity and subject to income tax. Losses are deductible, provided they have been accounted for.
Mining rewards
When an individual receives mining rewards from cryptocurrency activity, the Swiss taxation body views this as remuneration for services provided. This indemnity therefore represents taxable income. Provided that the criteria for self-employment is met by the individual in question, these rewards are qualified for tax purposes as income.
Staking rewards
Similar to mining rewards, compensation received by validators when participating in staking activities is considered as income from movable property. The amount of be declared as income is the market value at the time of receipt, converted into Swiss francs.
Airdrops
An airdrop occurs when cryptocurrencies, blockchains or projects distribute a coin or token, often employed as a marketing mechanism to gain momentum in the early stages. In Switzerland, airdrops are considered taxable as income at market value from movable property at the time of allocation.
Deductions
If you’ve incurred costs which are directly related and necessary as a part of realizing your income, you may be able to claim deductions from this at tax time. If transaction costs are not directly linked to the acquisition of the aforementioned revenue, you will not be able to claim deductions.
Do payment tokens incur withholding tax?
Payment tokens are not income subject to withholding tax, as in their form of digital means of payment, they are not seen as taxable objects. Payment tokens are therefore not subject to things like bond interest, dividends, distributions from collective investment funds, or interest on customer deposits.
Do payment tokens incur stamp duties?
As per the Federal Stamp Duty Act, payment tokens in the form of digital means of payment do not qualify as taxable objects and are therefore not subject to issuance duty, or negotiation.
Investment Tokens
What is an investment token?
An investment token is issued as part of an ICO (initial coin offering) or ITO (initial token offering), and embed appreciable rights in value vis-a-vis the counterparty or issuer. These rights vary depending on the nature of the agreement between the investor and the company of the issuer. Some examples are outlined below:
- Foreign capital tokens: These tokens carry the formal or de facto obligation of the issuer to repay all or an essential part of the investment and possibly to pay interest.
- Contract-based investment tokens: These tokens do not require the issuer to repay the investment. The investor's right relates to a financial benefit calculated according to a proportional share of a reference data determined in relation to the issuer (for example EBIT, license income or turnover) or according to a certain relationship with the profit and/or the liquidation result.
- Investment tokens with participation rights: These tokens represent participation rights (for example, shares and participation certificates). The right to share in the profits is governed by the articles of association.
We will now explore the tax treatment of these three different categories below.
Foreign capital tokens
What is a foreign capital token?
Foreign capital tokens are issued as part of a collective raising of capital. They generally relate to fixed amounts and give the right to reimbursement of all or an essential part of the investment, and potentially to the payment of interest. For tax purposes, foreign capital tokens are considered debt securities (bonds).
How does income tax apply to foreign capital tokens?
At the time of the issuance of foreign capital tokens, there is a permutation of wealth without affecting income. Interest on bonds paid periodically or in the form of one-time remuneration (disagio of issue and/or agio of redemption as the difference between the value of issue and the value of redemption) is subject to income tax 23 at the time of their realisation.
How does withholding tax apply to foreign capital tokens?
Interest on bonds paid periodically or in the form of a single payment is subject to withholding tax.
Do foreign capital tokens incur stamp duties?
Bond trading is in principle subject to the negotiation fee, at the rate applied to Swiss documents.
Do foreign capital tokens incur wealth tax?
Foreign capital tokens are movable capital which is subject to cantonal wealth tax. Wealth must be declared at market value at the end of the tax period. In the absence of a valuation price, the foreign capital token must be declared at its original purchase price converted into Swiss francs.
Contract-based investment tokens
What is a contract-based investment token?
A contract-based token is an investment tokens on a contractual basis are issued as part of a collective raising of capital, without (digital) participation rights in the form of shares or participation or profit-sharing certificates being created, nor bonds or units in collective investment schemes are issued.
How does income tax apply to contract-based investment tokens?
At the time of issuance of contract-based investment tokens, there is a permutation of wealth with no impact on income. Payments are fully considered income from movable capital and are subject to income tax. Investors are not entitled to a tax-neutral refund of the amount originally invested because, in the event of liquidation, the issuer has no obligation to refund. From a tax perspective, the corresponding losses are not allowable capital losses. From a tax point of view, the purchase and sale of investment tokens on a contractual basis are assimilated to transactions carried out with traditional securities.
How does withholding tax apply to contract-based investment tokens?
Income from contract-based investment tokens does not constitute taxable items. The payments are therefore not income subject to withholding tax such as interest on bonds, dividends, distributions from collective investment schemes and interest on client assets.
Do contract-based investment tokens incur stamp duties?
As contract-based investment tokens do not relate to taxable documents within the meaning of the Federal Stamp Duty Act, secondary market transactions involving such tokens are not subject to stamp duty of negotiation.
Do contract-based investment tokens incur wealth tax?
Contract-based investment tokens are movable capital that is subject to cantonal wealth tax. Wealth must be declared at market value at the end of the tax period. The tokens that are granted as part of the incorporation process are at least to be valued in a similar way to those given to independent third parties during the pre-sale phase. In the absence of a valuation price, the contract-based investment token must be declared at its initial purchase price converted into Swiss francs.
Investment tokens with participation rights
What is an investment token with participation rights?
As part of fundraising in the crypto world, it is possible to issue shares or other equity securities in the form of investment tokens with participation rights. The legal relationship between the issuer and the investor is governed by company law. The rights of the investor are regulated by the articles of association.
How does income tax apply to investment tokens with participation rights?
At the time of the issuance of investment tokens with participation rights, there is a permutation of wealth without affecting income. Dividend payments are considered income from movable capital and are subject to income tax
How does withholding tax apply to investment tokens with participation rights?
Income from investment tokens with participation rights is subject to withholding tax. The corresponding payments are subject to withholding tax as dividends.
Do investment tokens with participation rights incur stamp duties?
The transfer for consideration of investment tokens with participation rights is subject to the right of negotiation if the legal relationships are transferred in accordance with Swiss law.
Do investment tokens with participation rights incur wealth tax?
Investment tokens with participation rights are, from a tax point of view, movable capital which is subject to cantonal wealth tax. Wealth must be declared at market value at the end of the tax period. If no current valuation price can be determined, the investment token must be declared at the original purchase price, converted into Swiss francs.
Utility Tokens
What is a utility token?
Utility tokens give the investor the right to use digital services, available in most cases on a (decentralised) platform. These services are usually provided using a blockchain infrastructure and the investor's right of access to digital usage through the tokens is limited to the platform and service concerned.
How does income tax apply to utility tokens?
Generally, utility tokens are tradable and therefore have a market value. Utility tokens are considered, from a tax point of view, as movable capital which is subject to cantonal wealth tax and must be declared at market value at the end of the tax period. In the absence of a valuation price, the utility token must be declared at its initial purchase price converted into Swiss francs.
How does withholding tax apply to utility tokens?
Utility tokens do not constitute income, therefore are not subject to withholding tax.
Do utility tokens incur stamp duties?
Utility tokens are not taxable documents within the meaning of the Federal Stamp Duty Act. Their issuance and trading are therefore not subject to the right of negotiation.
Do utility tokens incur wealth tax?
Generally, utility tokens are tradable and therefore have a market value. Utility tokens are considered, from a tax point of view, as movable capital which is subject to cantonal wealth tax and must be declared at market value at the end of the tax period. In the absence of a valuation price, the utility token must be declared at its initial purchase price converted into Swiss francs.
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Disclaimer: The content of this guide is for general informational purposes only. It is not legal or tax advice. Viewing this guide, purchasing or using CryptoTaxCalculator does not create an attorney-client relationship or a tax advisor-client relationship.
The information in this guide represents the opinions of experienced crypto tax professionals; however, some of the topics in this guide are still subject to debate amongst professionals, and the FTA could ultimately release guidance that conflicts with the information in this guide. The information contained in this guide is based on the authors’ interpretation of the FTA’s current guidelines. Changes to the guidelines may be retroactive and could significantly alter the views expressed herein. Therefore, use this information at your own risk and for information purposes only.
Consult a professional regarding your individual tax or legal situation.