Crypto Tax in Switzerland
How are crypto-assets taxed in Switzerland? Do you need clarity on how the Swiss tax authority handles crypto assets? In December 2021, the Swiss Federal Tax Administration (FTA) and the Association of Swiss Tax Administrations published their updated working paper and guidelines on the taxation of crypto coins and projects. The working paper should also assist in improving compliance and, therefore, tax revenue for the FTA.
How does the Federal Tax Administration (FTA) know that I hold or trade crypto?
If you reside in Switzerland and have an account with European digital currency exchange, the Federal Tax Administration (FTA) likely possesses data regarding your crypto transactions. Furthermore, the FTA can review these transactions means that it would be difficult not to comply with tax regulations should the FTA wish to access your digital currency exchange.
How are crypto-assets taxed in Switzerland?
In Switzerland, crypto is classified as an asset. Such a classification implies that crypto assets will be constituted as a private wealth assets. Furthermore, capital gains tax does not apply to private wealth assets in Switzerland. Therefore, private investors pay no capital gains tax on these assets.
However, private investors in Switzerland shouldn’t be jumping for joy just yet, as several conditions need to be met if they are to be exempt from paying capital gains tax, which is the following:
- You’ve owned/held your crypto asset for at least six months.
- You have a trading profit of fewer than five times that of your holding at the start of the financial year.
- Your net capital gain is less than half of your total income accrued throughout the financial year.
- You do not make use of debt financing.
- You make use of derivative instruments primarily for hedging.
If you are considered a private investor, Swiss authorities have confirmed that there are only two taxes that you are liable to pay, namely income tax and wealth tax.
Income tax on crypto in Switzerland
If an employee receives crypto as a salary or part of a salary, this will be part of their taxable income. Likewise, self-employed individuals who accept crypto will also have a taxable income liability. Other crypto transactions that are subject to income tax include staking, mining & airdrops. Typically, the income tax rate in Switzerland will apply according to the federal tax rate, Canton Income Tax rate or the Municipal Income Tax rate. The Federal Income Tax rate does not vary across Switzerland. The Canton Income Tax rate varies depending on where you live, and the municipal income tax is subject to the conclusion that various municipalities have reached.
A wealth tax on crypto assets in Switzerland
Switzerland’s wealth tax applies to all private wealth assets, including crypto assets. The FTA considers the taxation value of the most commonly used crypto assets on the final day of each year. This average value depends on the asset’s average price on different crypto exchanges.
Tax breaks and tax-free crypto transactions in Switzerland
In addition to Switzerland’s relatively lenient perspective on crypto tax and regulation, there are numerous different scenarios where an individual qualifies for a tax break. They consist of the following:
- Crypto capital gains if you’re a private investor.
- Taxpayers receive a Federal Income Tax Allowance of 14 500 CHF.
- If your total crypto assets are valued less than a specific amount (again, dependent on the canton you reside in), you won’t pay wealth tax.
Some of the tax-free crypto transactions in Switzerland consist of the following:
- Transferring crypto between your wallets.
- If you’re a private investor, selling, spending and trading crypto.
- Holding crypto (however, you are still liable to pay wealth tax on your total assets).
- Purchasing crypto with fiat currency.
What can I do to make reporting crypto taxes easier on my part?
To declare your crypto income and assets, you’ll need to possess the following and be able to present them to relevant authorities:
- Salary certificates (payslips).
- Accounts (for self-employed).
- Pension statements (for retired citizens).
- Bank account statements.
- Statements relating to assets and investments.
The crypto tax environment in Switzerland tends to be relatively lenient, but the environment is likely to keep evolving over the next few years. Compliance with a tax on both an income and wealth basis is essential to avoid costly legal procedures. The regulatory framework clarifies crypto tax implications, but also makes it clear that this framework continues to evolve, which indicates that exploring the legal routes to minimise tax liability will be beneficial.
(Disclaimer: This does not constitute financial advice)