Swiss crypto taxes: Introduction
In the ever-evolving world of cryptocurrency taxation, staying informed is paramount.
On 19 October 2023, the Swiss Federal Tax Administration made significant updates to its tax information regarding cryptocurrencies.
Let’s take a peak under the digital bonnet and see what they said…
Non-Fungible Tokens (“NFTs”)
General
At one point, NFTs looked to be taking over the world – one ape at a time.
However, the wind has been taken out of their sails during the so-called ‘crypto winter’. Even apes suffer from frostbite!
If it were needed, the Swiss Federal Tax Administration has put forward a comprehensive definition, characterising NFTs as cryptographically unique, indivisible, irreplaceable, and verifiable assets.
They represent specific objects, whether digital or physical, on a blockchain, and each NFT exists only once, rendering it unshareable or replaceable.
There is nothing of surprise here.
However, it’s worth noting that the definition mainly aligns with the traditional notion of NFTs. It perhaps does not address ERC-1155 NFTs, which can represent both fungible and non-fungible tokens in a single smart contract.
This is symptomatic of the fact that, despite the best will in the world, authorities are always behind the curve.
Tax position for NFTs
The purchase and sale of NFTs, according to Swiss tax authorities, are generally treated like traditional asset transactions.
Income tax implications do not arise from NFT purchases, as these transactions don’t alter the buyer’s assets.
Transaction costs related to the purchase are not tax-deductible for non-professionals, as they pertain to asset swapping rather than management. Profits or losses incurred during NFT sales are not considered.
However, royalties paid to NFT creators during various transfers are subject to income tax as intangible asset income..
For companies, corporate income tax considerations come into play.
The difference between the purchase and sale prices, along with license fees, is considered taxable income or expenses.
As for withholding tax, the Swiss Federal Tax Administration emphasizes that NFT transactions are generally not subject to it, as they do not typically constitute income from movable assets.
Ultimately, it stresses, the tax position must be determined on a case by case basis.
Airdrops
Airdrops have become a popular way for blockchain projects to distribute crypto-assets to specific individuals.
The tax implications of airdrops are addressed in the new update.
In principle, tokens received via airdrops by individuals taxable in Switzerland are considered taxable.
The nature of the airdrop, whether it falls under general income, employment relationships, returns on movable assets, or certain exemptions, depends on its structure.
There are specific considerations for airdrops that resemble promotional games, which could be tax-exempt up to CHF 1,000, provided certain conditions are met.
Conclusion
This update from the Swiss Federal Tax Administration represents a positive step in clarifying the tax consequences of the crypto ecosystem.
However, the complexity of the crypto-tax landscape remains.
Precise tax planning is essential for crypto-related and FinTech projects, as case-by-case analysis often holds the key to understanding and complying with the evolving tax regulations.
If you have any queries about Swiss crypto taxes, Swiss taxes in general, or any other tax matters then please get in touch.