Swiss tax authorities provide additional clarity on crypto-taxation

Switzerland, by some referred to as a ‘crypto nation’, already has non-profit foundations to house hundreds of millions of dollars crowdfunded by blockchain projects and the crypto foundations continue to thrive in Switzerland.

In December 2021, the Swiss Federal Tax Administration as well as the Association of Swiss Tax Administrations published their updated workpapers and guidelines on the taxation of crypto coins and projects. The new guidelines are based on real life cases that have been presented to and discussed with the authorities up to December 2020. 

The guidelines are structured around particular types of tokens and the fiscal framework. Apart from the traditional payment token, the guidelines outline the tax treatment of several types of tokens such as debt tokens, asset backed tokens as well as utility tokens. Further, the guidelines do also include comments around the tax treatment of non-fungible tokens.

The published papers provide specifications on the taxation for any common transaction with the above-mentioned tokens. This includes comments on the practice regarding initial token and coin offerings, trading gains and losses, rewards and airdrops, revenue generated from mining and staking by delegators and validators and even considerations for the treatment when rewarding employees with tokens. 

For foundations and corporations issuing utility tokens, the guidelines offer a tax efficient handling of the proceeds from an initial token sale. The proceeds may be booked as revenue with a corresponding provision. Alternatively, it is permitted to book the proceeds as a liability which is released over the go-live phase corresponding to the cost incurred.

For private crypto investors a particularly important topic is the differentiation between tax free capital gains from private investing and taxable capital gains from self-employed trading. Here, the publications refer to the published save haven rules for securities trading, which qualifies capital gains as tax free if the following conditions are cumulatively met:

• Holding period of at least six months;

• Trading turnover smaller than 5x of the holding at the beginning of the tax period;

• Capital gains are smaller than 50% of the total income in the respective tax period;

• No debt financing; and

• Derivatives are solely used for hedging.

The publications encompass a variety of new guidelines and provide legal certainty for the most common transactions in the crypto filed. Nonetheless, the crypto ecosystem is a fast-paced industry and new transaction types and offers will always be a step ahead of the guidelines. 

In such an environment the approach of the Swiss Tax Administrations that allow for discussions and the search of a mutually beneficial solution is extremely valuable. In addition, the instrument of obtaining an advanced ruling to gain legal certainty on the taxation of specific transactions up front offers a big benefit to crypto projects and is an instrument to foster trust by the community. 

Overall, not only from a tax perspective, but generally Switzerland remains an attractive hub for blockchain projects in various live phases. 

René Zulauf

Partner, Deloitte Switzerland

E: rzulauf@deloitte.ch

Thomas Ingold

Assistant manager, Deloitte Switzerland

E: tiingold@deloitte.ch