Correct taxation of cryptocurrencies
- May 3, 2023
- Posted by:Julia
- Categories:cryptocurrencies, taxes
Due to the ever-present presence of cryptocurrencies in Switzerland, inquiries regarding the correct taxation of cryptocurrencies have increased.
With this article we would like to offer you a support on the taxation of cryptocurrencies and summarize some points of the Swiss Federal Tax Administration (FTA) regarding cryptocurrencies and taxes. Please note that the blog post is based on information as of December 14, 2021.
Generally, the following applies to non-commercial investors:
Cryptocurrencies have been declared as movable and assessable property, which is why they fall under the heading of assets and are therefore subject to property tax.
As with other assets, such as securities, the year-end price of the cryptocurrency counts towards the tax values. However, because cryptocurrency exchange rates are not uniform across all trading platforms, the FTA compiles a list of average year-end tax exchange rates for a few selected cryptocurrencies toward the end of the year. (FTA, 12/14/2021, p.3-4) Under the Assets list, you can specify your cryptocurrencies according to the determined year-end rate.
The list of 2022 year-end rates of cryptocurrencies can be found in the document Foreign Exchange - Banknotes on the last page: https://www.ictax.admin.ch/extern/de.html#/ratelist/2022
Activities such as staking qualify as income from movable assets (Art. 20 para.1 DBG) and behave similarly to recurring interest in tax terms and are also taxed on the account.
Special cases form active mining or also airdrops, these and under which circumstances one is classified as a commercial investor, we are happy to elaborate for you below. (ESTV, 14.12.2021, P.4-5)
When does one become a commercial investor and what changes does that bring?
The tax authority uses five criteria in each case to determine whether a classification as a commercial investor exists. As long as all of the following criteria are met, one is not classified as a commercial investor. If individual criteria are met, it is considered on a case-by-case basis whether reclassification to commercial investor must occur. The following five criteria were taken from the FTA 's list (July 27, 2012) from Circular Letter No. 36 on page 3:
- "The holding period of the securities sold is at least 6 months.
- The transaction volume (corresponds to the sum of all purchase prices and sales proceeds) per calendar year does not exceed a total of five times the securities and credit balance at the beginning of the tax period.
- The realization of capital gains from securities transactions does not constitute a necessity to replace missing or eliminated income for living expenses. This is usually the case if the realized capital gains amount to less than 50% of the net income in the tax period.
- The investments are not leveraged or the taxable investment income from the securities (such as interest, dividends, etc.) is greater than the proportionate interest on debt.
- The purchase and sale of derivatives (especially options) is limited to hedging own securities positions."
If some criteria are met, it is possible that you will be classified as a professional crypto trader. As a result, the capital gains earned are reduced by contributions to the AHV and are also subject to progressive income tax. However, in the case of capital losses, these can be claimed for tax, which is not possible for non-professional investors. (ESTV, 27.07.2012, PP. 6-7)
Self-employment and income tax for cryptocurrencies
For cryptocurrencies based on proof of work, mining is essential. Active mining is considered self-employment and must therefore be taxed as taxable income. In the case of self-employment, AHV contributions are due, but professionally justified costs can be declared as a deduction. Airdrops also fall under the heading of income tax. In short, airdrops are tokens that are allocated free of charge. From the moment of allocation, their market value must be declared as income from movable assets of the income tax. (ESTV, 12/14/2021, P.5)
For more detailed handling of payment tokens, investment tokens and usage tokens, please refer to the source list below. This letter is provided for informational purposes and is not a substitute for tax advice.
Disclaimer
Although we have made every effort to carefully research and verify the information in this article, the blog posts are neither an offer nor a solicitation to buy or sell investment or other specific products and cannot substitute for personal advice from a financial, legal and/or tax advisor. The content in this post is for general information purposes and therefore does not constitute investment advice. No liability can be accepted for decisions made on the basis of information in this blog post.