March 29, 2018
Tax Compliance
Tax implications for cryptocurrencies - Part 1: Individuals

Cryptocurrencies are completely disconnected from governments and are basically only subject to the control of the users. However, since they have a value, the government demands taxes on them. Here you can find out what is particularly important for natural persons.

How are the different cryptocurrencies threated?

The legal claims that a token unfolds depend on its respective function. The different legal claims can have a direct influence on the tax treatment of the token. It is therefore important that each token is always considered and evaluated individually. For example, if a token results in a periodic payment to the owner, it is conceivable that a withholding tax will be due. However, if the token conveys a right to a service or delivery in the future, it must be checked whether VAT is due. These explanations concern only the pure cryptocurrencies, whose best known example is the bitcoin.

The implications for individuals in Switzerland

Many swiss cantons have already spoken about the taxation of cryptocurrencies. The cantons of Lucerne, Zurich and Zug had largely the same opinion regarding the taxation of cryptocurrency holders.  In all these cantons, a wealth tax is due on a portfolio of cryptocurrencies. The cryptocurrencies must be shown in the list of securities and credit balances under the item "other credit balances". An extract of the Wallet with the position at the end of the tax period shall be deemed to be a supplement.

The Swiss Federal Tax Administration (which treats cryptocurrencies as foreign currencies) publishes a year-end tax rate for certain cryptocurrencies, including bitcoins. The cantons have different views on how crypto currencies should be valued ( the FTA does not publish a year-end quotation). In the Canton of Zurich, the year-end quotation corresponds to the ones that can be found on the most common platform. Lucerne, on the other hand, insists on a purchase price disclosure.

Under Swiss tax law, capital gains from movable private assets are generally tax-free or the losses are not taken into account for tax purposes. Of course, this also applies to cryptocurrencies. However, you have to be careful; salary payments or remuneration which are paid out in cryptocurrencies are subject to regular income tax. The same applies to mining or commercial trade, which qualifies as self-employment. If this is the case, the profits become taxable and the losses deductible.