More and more people look for a country that has crypto friendly tax rules. In this article we’ll have a closer look at Switzerland crypto tax to see if you should consider this country as a crypto investor or trader.
How is Crypto Taxed in Switzerland?
If we want to determine how crypto is taxed in Switzerland we need distinguish between private investors on the one hand and professional traders on the other hand.
In addition, you should know that Switzerland is split up in different regions or cantons. Each of the cantons has bit fiscal autonomy and can decide to have particular tax provisions and rates in place. What we discuss further in the article are the general principles based on the federal legislation. However, particular cantons can deviate from these principles.
Crypto Taxes for Private Individuals
As a private individual you will not pay any income tax or capital gains tax if you act as a passive investor.
However, you need to include the value of your cryptocurrencies in your taxable basis for the calculation of the wealth tax.
How much wealth tax you will have to pay on this will depend on two factors. First, the canton or region in which you are a tax resident and second the overall value of your assets (cryptocurrencies and others) subject to the wealth tax.
Therefore, any gains made from trading cryptos aren’t directly taxed but indirectly via the wealth tax.
Crypto Taxes for Professional Traders
As a professional trader the situation is different than for private investors.
If you trade actively and you are a professional trader, you will have to pay personal income tax on your profits.
This doesn’t only apply to capital gains from trading but also income from e.g. mining, staking or an airdrop.
The exact income tax rates depend on the canton you are living in.
Furthermore, you will also have to pay social contributions which also depend on your taxable income.
Moreover, you’ll also still have to include your assets in the calculation of the wealth tax.
Which Taxes Apply to Crypto in Switzerland?
If you invest in cryptocurrencies different taxes can apply to you. We’ll discuss the different taxes you need to watch out for.
Capital Gains Tax
If you sell any cryptos you potentially have to pay income tax on it. Capital gains tax is basically part of income tax. In Switzerland, capital gains are part of your general taxable income and subject to progressive tax rates.
Luckily for crypto investors, Switzerland generally exempts you from paying tax on capital gains if you are a passive investor.
If you do trade actively though, you will pay the progressive rates we referred to before and on top of this you’ll also have to pay social contributions on your trading income.
The assessment whether you qualify as a passive investor or rather as an active investor is made on a factual basis. The Swiss tax authorities take the following criteria into account:
- Did you hold the cryptos for at least six months;
- The turnover from your trading is smaller than five times the value of your portfolio at the beginning of the year;
- The capital gains are less than 50% of your total taxable income;
- You don’t use debt to finance your investments;
- You only use derivatives for hedging yourself.
For companies the capital gains made from trading cryptocurrencies will be part of the taxable income of the company. Consequently, your company will pay corporate income tax on it.
Unlike for individuals, it does not matter for companies if they invest passively or trade actively as the profit will be taxed in any case.
Switzerland Crypto Tax: Social Contributions
We already mentioned that if you trade actively you need to pay personal income tax on your trading profits.
However, what many people seem to forget that in this case they also need to pay social contributions based on the profit they make. Just like you have to pay social contributions on any other professional income.
These social contributions cover a range of public benefits like pension, general health insurance, disability insurance and loss of earnings insurance.
Wealth Tax
Switzerland does levy a wealth tax and cryptocurrencies are part of the taxable basis for the calculation.
As with the income tax rates, the rates for the wealth tax are mostly progressive. So, the higher the value of your assets, the higher the tax rate.
It’s not only the value of your cryptocurrencies which you take into account for the calculation of your wealth tax, it is all of your worldwide assets at fair market value with some particular exemptions.
Just like for income tax, cantons have a high level of autonomy to decide on the rate for the wealth tax. Therefore, you can try to look for a canton with a lower wealth tax to establish yourself in.
How are Businesses Taxed on Cryptocurrencies in Switzerland?
In Switzerland businesses pay corporate income tax on their profit.
The corporate tax rate is a combination of taxes on various levels: federal, cantonal and municipal taxes. Therefore, the exact tax rate depends on where your business is located. The total rates vary between 11,9% and 20,5%
If a business makes a profit from selling cryptocurrencies, the aforementioned general tax rates apply. Unlike for private individuals, Switzerland does not have a separate tax regime for capital gains from cryptocurrencies for businesses. Therefore, it does not matter if the company trades actively or holds the investments more long term.
How to Legally Optimize Your Crypto Taxes in Switzerland?
If you want to legally optimize your Switzerland crypto tax I would always urge you to get in touch with an experienced advisor in the field.
If you need assistance in this respect, you can reach out to me.
FAQ on Switzerland Crypto Taxes
Let’s now have a look at some frequently asked questions about Switzerland crypto tax.
How are Cryptocurrencies Classified for Tax Purposes in Switzerland?
Switzerland classifies cryptocurrencies as financial assets for tax purposes.
This classification means that they are treated the same as other financial assets like stocks and bonds for example.
Practically, this means that as a private investor you can exempt them from capital gains tax. However, in order for this to apply you need to meet certain conditions to ensure you act as a rather passive investor. If you trade actively income taxes will apply.
Furthermore, the qualification as financial assets also means that you have to take the value of your cryptocurrencies into account for calculation the wealth tax.
The aforementioned interpretation is the one followed by the Swiss Federal Tax Administration (ESTV). Please note that given the fiscal autonomy of the cantons in Switzerland they could technically apply a different qualification for cryptocurrencies.
Is Crypto Trading Tax-Free in Switzerland?
Crypto trading can be tax-free in Switzerland if you’re a passive investor. However, it all depends on the facts and circumstances.
If you trade actively and the tax authorities see you as a professional trader, you will have to pay income tax on your profits from crypto trading. Moreover, in this case also social contributions will apply further increasing the total tax burden.
Furthermore, the wealth tax still applies to the overall value of your portfolio irrespective if you trade (actively) or not.
How Do You File Your Crypto Taxes in Switzerland?
Although cryptocurrencies can be free from income tax in Switzerland, you will still need to report them.
The exact reporting requirements will depend on the canton you live in. However, in any case you will need to report the value of your cryptocurrencies on 31 December of the tax year. The reason for this is that the tax authorities will take the value into account for the calculation of the wealth tax.
If you do have crypto income (e.g. active trader or mining) that is taxable for income tax purposes, you will need to include more details in your tax return in order to allow the authorities to calculate your personal income tax and social contributions.
Is There Capital Gains Tax in Switzerland?
In general, there is no separate capital gains tax in Switzerland.
However, this doesn’t mean that any income from cryptocurrencies remains tax free.
If you trade actively, you will have to pay income tax on your profits. In this case, you might want to have a look at the list of crypto tax free countries to find a more suitable option.
Is Cryptocurrency Legal in Switzerland?
Yes, cryptocurrency is legal in Switzerland.
Switzerland was one of the first countries in the world to create a regulatory framework for cryptocurrencies. The Federal Law on Developments in Distributed Ledger Technology (DLT Act) includes rules regarding crypto licensing, trading and measures to avoid money laundering in the crypto sector.
The Swiss Financial Market Supervisory Authority (FINMA) oversees the implementation of the legislation.
Yet, Switzerland does generally not accept cryptocurrencies as legal tender or a currency and rather sees it as a financial asset. Nevertheless, some cantons (e.g. Zug) do accept Bitcoin as a form to pay local fees and taxes.
Why is Switzerland Crypto-Friendly?
Switzerland is crypto-friendly for multiple reasons.
First, Switzerland has a regulatory framework that governs cryptocurrencies and the ecosystem around it. In this way, the country wants to stimulate innovation and attract companies who are active in the blockchain field.
At the same time, Switzerland wants to make sure that it only allows legitimate businesses with good intentions to operate. To ensure the legitimacy of operators in the field, the country has regulation in place and the Swiss Financial Market Supervisory Authority has the task to channel it.
Furthermore, Switzerland offers an interesting tax landscape for long-term crypto investors. However, your tax liability will heavily depend on the canton you choose to operate from.
Moreover, the whole world knows Switzerland as the country with one of the best financial systems. These banks are also jumping on the wagon of cryptocurrencies and offer various services in this regard.
Therefore, it should be no surprise that many international blockchain projects like the Ethereum Foundation and Cardano Foundation have their home base in Switzerland. We also included Switzerland in our list of the best crypto-friendly countries.
