Taxation of Private Individual Investors
a. Income Tax
Holding of tokens: merely holding tokens acquired via crypto exchanges is not considered to generate income or earnings.
Generally, the purchase or sale of tokens is treated equal to transactions with conventional assets: profit and loss from such private assets transactions generally constitute tax-free capital gains / non-deductible capital losses (exempt from income tax) for individuals.
Exception (professional token dealer): where the type, scope, and financing of transactions indicate professional investment activity (see below), this is deemed as self-employment rather than private asset management. Consequently, capital gains from sale of tokens regarded as professional activity are subject to income tax and social security contributions. Losses are tax deductible.
Likewise, payment of wages or fringe benefits to an employee as native tokens is taxable income to be shown on the wage statement (as value at the time of receipt converted into CHF) and subject to social security contributions. Depending on the Canton where the employer is domiciled, such tokens might be qualified as employment incentive plans, which would lead to different tax treatment (careful analysis and tax ruling by the employer strongly recommended).
b. Wealth Tax
Since tokens are regarded as intangible assets under moveable capital assets for tax purposes, they are subject to cantonal wealth tax and are to be valued at the end of a tax period at market value.
The Federal Tax Administration publishes the tax values of the most common cryptocurrencies in the exchange rate list.
- In its absence, taxpayer should use the market value of a major crypto exchange or a reputable website (i.e. coinmarketcap.com).
- If no market value can be determined, token is to be declared at the original purchase price converted into CHF.
c. Professional token dealer
While there is no specific guidance on trading in crypto, tax authorities apply existing guidance and court practice of securities trading.
Generally, the following indicate professional investment activity:
- Frequent trading: though this criterion seems only to be applied in extreme cases.
- Leverage: in particular debt financing
- Use of speculative derivatives
d. Investing via Swiss investment company
While investing via a company is generally not advantageous for Swiss individuals, who might otherwise benefit from tax-free capital gains, using an investment company may make sense in the following situations:
- Use of leverage or other active investment strategy that would trigger the individual to become a professional token dealer
- Reinvesting income within an existing company, thereby deferring income taxation at the investor level
- Pooling investment of various shareholders (company might not become regulated investment entity)
Corporate income tax applies to gains derived by a Swiss company (tax rates range approx. 12 – 20%). Additionally, gains are subject to Swiss withholding tax (mostly relevant if foreign investors use a Swiss company for their crypto investments).