Wondering how cryptocurrency is taxed in Switzerland? The Swiss Federal Tax Administration has given clear guidance on Switzerland crypto taxes and it's good news for investors. For the most part - private investors won't pay Capital Gains Tax on their crypto gains, it's only businesses and self-employed traders who would pay Capital Gains Tax. So for many investors, in the so-called 'crypto nation' - you'll only pay Wealth Tax on your crypto, as well as potential Income Tax depending on your specific crypto investments. Read on to learn more about Swiss crypto tax rules for 2023.

This guide is regularly updated

One last thing before we start - the rules on crypto tax are in constant flux. At Koinly we keep a very close eye on the FTA's crypto policies and regularly update this guide to keep you informed and tax-compliant.

24 January 2022: Updated to reflect new guidance from the Swiss Federal Tax Administration.

24 November 2021: Welcome to your Switzerland cryptocurrency tax guide!

I'm a private investor, is crypto taxed in Switzerland?

Yes. Crypto is taxed in Switzerland under the Wealth Tax system. You may need to report specific crypto transactions as part of your annual tax return.

How is crypto taxed in Switzerland?

The Swiss Federal Tax Administration (FTA) don't classify cryptocurrency as legal tender - like the Swiss Franc. Instead, they class crypto as an asset - specifically a crypto based asset or kryptobasierte vermögenswerte.

This classification means crypto is considered a private wealth asset - like a stock or a bond.

For private investors in Switzerland - Capital Gains Tax does not apply to private wealth assets. Capital Gains Tax only applies if you're a self-employed trader or a business.

This doesn't mean you won't pay any tax on your crypto. Crypto is still subject to Income Tax in some instances, as well as the Wealth Tax. We'll break all this down, but first let's look at what makes you a private investor vs a self-employed trader.

Private investor vs. trader

No Capital Gains Tax can sound too good to be true, but it is the case for many investors in Switzerland. These so-called 'safe haven' rules have long applied to securities trading and the same rules apply to crypto. Provided you meet the following conditions - you'll pay no Capital Gains Tax on your profits from selling or trading crypto:

• You've held your crypto asset for at least six months.
• You have a trading turnover smaller than 5x your holding at the beginning of the financial year.
• Your net capital gain is smaller than 50% of your total income throughout the financial year.
• You have no debt financing.
• You use derivatives solely for hedging.

If you do not meet these requirements - your crypto assets may not be tax-exempt from Capital Gains Tax. Each individual canton is responsible for deciding whether you'll be viewed as a private investor or a self-employed trader, so you should seek advice from an experienced accountant if you're unsure.

Which taxes apply to crypto in Switzerland?

As long as you're considered a private investor - this means there's only two taxes your crypto could be subject to:

1. Income Tax.
2. Wealth Tax.

Let's look at both.

Income tax

In some instances, you'll pay Income Tax on your crypto - where you're seen to be earning crypto.

For example, if an employee receives cryptocurrency as a salary, this is part of their taxable income. The value of the cryptocurrency in Swiss Francs at the time of receipt must be noted on the pay slip. Similarly, if a self-employed person accepts Bitcoin or other cryptocurrencies for the provision of their services, this income must also be included in the income in the amount of the equivalent in Francs.

Other crypto transactions that are subject to Income Tax include:

• Mining crypto.
• Staking crypto.
• Airdrops of crypto.

While the FTA hasn't yet released guidance on a variety of DeFi protocols - it is also possible that many DeFi activities such as yield farming and liquidity mining may be considered additional income and subject to Income Tax too. Something to check with your accountant.

Crypto Income Tax rate Switzerland

Income Tax in Switzerland is made up of potentially three different taxes:

1. Federal Income Tax - this is the same tax rate across Switzerland.
2. Canton Income Tax - this tax rate is set by the specific canton so varies depending on where you live.
3. Municipal Income Tax - municipalities in Switzerland are entitled to set their own communal tax rates, though most follow the Canton Income Tax rates.

Switzerland uses a progressive Federal Tax rate and many cantons follow the same structure - although some cantons have recently introduced flat rate taxation. There are 26 cantons overall and 2,929 municipalities. What all this means is the Income Tax rate on your crypto will vary considerably based on where you live in Switzerland and how much you earn.

This said, here's the Federal Income Tax rates for Switzerland (2021):

Source

Crypto Wealth Tax Switzerland

The Wealth Tax in Switzerland applies to all private wealth assets - which includes crypto.

The FTA defines the taxation value of the most commonly used cryptocurrencies on the 31st of December each year - based on the average price of the currency on a variety of different crypto exchanges. Currencies include Bitcoin, Bitcoin Cash, Ether, Litecoin and Ripple to name a few.

Taxpayers need to refer to these values when declaring their crypto assets. If the FTA has not provided a value - the taxpayer needs to declare the value on the 31st of December on the platform they hold the asset on. So for example, if you held ALGO in a Coinbase wallet - you'd declare the fair market value of ALGO on the 31st of December (Koinly can help with this).

You'll then pay tax based on the total value of your assets - including your crypto.

Wealth Tax rates Switzerland

So how much will you pay in Wealth Tax on your crypto? It all depends on where you live and the total value of your assets. Each canton sets their own Wealth Tax rate and in many cantons the Wealth Tax rate is progressive - so you'll pay more if your assets are worth more.

This said, most cantons have a Wealth Tax of between 0.3 - 1%, so it's not a high tax rate in any instance. Each canton also has a Wealth Tax exempt allowance - a portion of private wealth you don't pay tax on. Again, this varies based on the specific canton in which you live but is normally around 100,000 CHF per individual taxpayer. You can find out more about your canton's Wealth Tax rates here.

Crypto tax breaks Switzerland

Due to its unusual tax rules, Switzerland doesn't have any specific crypto tax breaks. But you can make the most of the following tax laws to pay less tax on your crypto:

1. Crypto capital gains are tax-exempt: Providing you're a private investor, you'll pay no Capital Gains Tax on your crypto. So make sure you stick to the private investor guidance to ensure you avoid an unwelcome tax bill!
2. Federal Income Tax allowance: Every taxpayer gets a Federal Income Tax allowance of 14,500 CHF that is tax free. Many cantons also have their own Income Tax allowances.
3. Wealth Tax allowance: Every taxpayer gets an individual Wealth Tax allowance that's tax free. So provided your total assets are under a certain value, you'll pay no Wealth Tax on them. Cantons set the specific allowance that is tax free. Your Wealth Tax allowance will increase if you have dependents.

Crypto capital losses Switzerland

Because crypto gains are tax exempt for private investors, you cannot deduct crypto capital losses. However, if you qualify as a self-employed trader or a business, you may be able to deduct crypto capital losses to reduce your tax bill.

Tax free crypto Switzerland

There are many crypto transactions that are tax free in Switzerland, including:

• Buying crypto with fiat currency - like CHF.
• Selling, trading and spending crypto - provided you're a private investor.
• HODLing crypto - excluding the Wealth Tax on total assets.
• Transferring crypto between your own wallets

Lost or stolen crypto Switzerland

Lost your private keys or been hacked and hoping to reduce your tax bill? Unfortunately, because the FTA don't allow crypto capital losses as deductions, it is unlikely that lost or stolen crypto would be tax deductible. This said, they have released no specific guidance on lost or stolen crypto.

Can the FTA track crypto?

If you have an account with a European digital currency exchange, then it's likely that the FTA already has crypto your data.

When the European Union’s Sixth Anti-Money Laundering Directive came fully into force on June 3 2021, every company that provides financial services to cryptocurrency customers and businesses will have to comply with much tougher regulations about when and how they identify customers. Data is made available between EU member states in a bid to stamp out money laundering and illegal activities.

Do you pay tax when you buy crypto in Switzerland?

No. You'll pay no tax when you buy crypto in Switzerland - regardless of what you buy your crypto with. Though HODLing your crypto is technically taxed under Wealth Tax.

Do you pay tax when you sell crypto in Switzerland?

Provided you're a private investor - no, you'll pay no tax when you sell crypto in Switzerland.

Do you pay tax when you transfer crypto in Switzerland?

No. You won't pay tax when you transfer crypto around your own wallets or exchanges you use.

Airdrops and forks tax

Airdrops are subject to Income Tax in Switzerland. Meanwhile, there's no specific guidance for hard forks - but as you would receive an airdrop of coins due to a hard fork, it is likely they're subject to the same tax rules.

Crypto gifts and donations tax Switzerland

Like most taxes in Switzerland - Gift Tax varies depending on the specific canton in which you live. So while there is no Federal Gift Tax in Switzerland, in some instances you may pay tax on your crypto, depending on where you live. In better news, you may be able to reduce your tax bill with a donation!

Crypto mining tax Switzerland

On a Federal level - Switzerland considers crypto mining to be a type of income. To further convolute things though, specific cantons set the limits as to whether mining is considered business or self-employment income which affects the subsequent taxation and deductions.

For example, the cantons of Bern and Zurich state that crypto mining always falls under self-employment income, while the cantons of Lucerne and Zug assess crypto mining activity on a case by case basis to establish whether mining activity constitutes self-employment activity, hobby activity or business activities.

All this to say, the rate of tax and the kind of tax you'll pay on your crypto mining depends on where you live and the level at which you're mining.

Crypto margin trading, derivatives and other CFDs

The FTA has not issued specific guidance on crypto margin trading, derivatives and other CFDs just yet. However, they have extensive guidance on the trading of traditional securities and derivatives - and it's good news. Just like with crypto, provided you're a private investor - you'll pay no Capital Gains Tax on profits from crypto margin trades, derivatives or other CFD products. Refer to the private investor vs self-employed trader guidance above to see whether you fit into this category.

DeFi crypto tax Switzerland

The FTA has not issued any clear guidance on DeFi taxes just yet, but this doesn't mean you won't pay taxes on your DeFi activities. It just means you need to interpret the current crypto tax guidance and apply it to your DeFi activities. In most instances, this boils down to whether you're seen to be 'earning' new coins or tokens or whether you're selling or trading on DeFi protocols. It is always advisable to speak to an experienced crypto tax accountant for specific advice around these transactions.

All this said, we can infer from the current crypto tax guidance that the tax treatment of common DeFi activities is likely to be:

• Earning interest from DeFi protocols: Potential Income Tax.
• Borrowing from DeFi protocols: No tax.
• Paying interest to DeFi protocols: No tax.
• Staking on DeFi protocols: Income Tax.
• Yield farming DeFi protocols: Potential Income Tax.
• Liquidity mining: Potential Income Tax on new liquidity pool tokens.
• Adding/removing liquidity: No tax.
• Earning through play/engage to earn DeFi protocols: Potential Income Tax.
• Profits from DeFi margin trading and options protocols: No tax provided you're a private investor.

NFTs tax Switzerland

Like DeFi taxes, the FTA hasn't yet issued clear guidance on non-fungible tokens and tax. However, we can infer from the current crypto tax rules how various NFT transactions would be taxed in Switzerland:

• Buying an NFT with fiat currency: No tax provided you're a private investor.
• Trading one NFT for another: No tax provided you're a private investor.
• Selling an NFT: No tax provided you're a private investor.
• Minting an NFT: No tax provided you're a private investor.
• Creating and selling NFTs: If you're creating and selling NFTs to make an income, depending on the scale, this may be viewed as self-employment income and subject to Income Tax. You should consult with an experienced tax advisor for more advice if this is your situation.

Cost basis method Switzerland

Remember - capital gains are tax exempt in Switzerland for private investors. However, if you're considered a self-employed day trader or a business the following cost basis methods are allowed:

• ACB
• FIFO
• LIFO
• HIFO

Source

When do you need to report your crypto taxes to the FTA?

You report your crypto taxes as part of your annual tax return in Switzerland.

The Swiss financial year is the same as the calendar year - so it runs from the 1st of January to the 31st of December each year. You need to file your taxes for the financial year by the 31st of March the following year. This means Swiss taxpayers are currently reporting on the 2022 financial year and they need to submit their annual tax return by the 31st of March 2023. Most cantons will allow you to have one free filing extension if you struggle to do this by the deadline.

How to calculate your crypto taxes

Calculating your crypto taxes so you can report them to your canton is time consuming. You can do it all manually, or you can use a crypto tax calculator like Koinly to save hours of spreadsheets.

If you want to calculate your crypto taxes manually, follow these steps:

1. Identify all your taxable crypto transactions for the financial year.
2. Identify the fair market value of each of the crypto assets you hold on the 31st of December for the financial year.
3. Identify which transactions are subject to Income Tax.
4. Calculate the fair market value of any crypto income in CHF on the day you received it.
5. Report your crypto income and the total value of your crypto assets to the FTA in your annual tax return by the 31st of March.

How to report crypto taxes to the FTA

All Swiss citizens need to file an annual tax return by the 31st of March 2023, reporting on the 2022 financial year. Individual cantons administer their own tax returns. To declare your income and assets you'll need:

• Salary certificates (pay slips).
• Accounts (for self-employed).
• Pension statements (for retired citizens).
• Bank account statements.
• Statements relating to assets and investments.

You'll declare the income you receive as an employee, and any additional income from self-employment activities or other in come on your annual tax return. You'll also need to declare the following value of the following assets on your tax return:

• Real estate.
• Securities.
• Crypto assets.
• Cash.
• Bank account balances.
• Life and pension insurances policies (surrender value).
• Any collectibles like art.

Your taxable assets under the Wealth Tax are all your assets minus allowable deductions. Debts such as mortgages or loans can be deducted from your total asset value. Many cantons also allow social deductions and a tax allowance. Check the specific rules in your canton for allowable deductions, tax allowances and reportable assets.

You can file your tax return online with your cantonal tax administration. Find a full list here. Each canton has a slightly different process and tax return. For example:

• Canton of Aargau: crypto assets are listed in the annual tax return using Form 101.05 list of securities and credit balances. As well as this, proof of asset storage must be provided, i.e. an end of year holdings report from a given exchange or wallet.
• Canton of Berne: crypto assets are declared in tax return using Form 3 (Wertschriftenverzeichnis und Rückerstattungsantrag Verrechnungssteuer).
• Canton of Basel-Stadt: crypto assets are declared in your tax return using code 835 (Bargeld, Edelmetalle und übrige Vermögenswerte).
• Canton of Lucerne: crypto assets are declared alongside other securities as other assets, but taxpayers must enclose a receipt or proof of the digital wallet holding the asset with the declaration.
• Canton of St. Gallen: crypto assets are declaured in the list of securities and credit balances. For any changes in the holdings of securities (i.e. sale, acquistion), the date of the addition or sale must be listed.
• Canton of Zug: crypto assets are declared in the list of securities using code 160 for asset income and code 600 for assets).
• Canton of Zurich: crypto assets are declared as other assets in the securities and assets register and proof of the digital wallet the asset is stored in must be enclosed.

How to pay tax on cryptocurrency in Switzerland

Once you’ve filed your annual tax return with your cantonal tax office- they’ll let you know how much tax you owe on your crypto. You generally have 30 days to pay any due taxes.

How to avoid paying tax on crypto in Switzerland

There are ways to strategically - and legally - reduce your crypto taxes in Switzerland. But remember - you need to make any moves to optimise your tax position by the end of the financial year, so you've missed the boat on 2021. However, for the 2022 financial year, you can pay less crypto tax by:

• Ensuring you're considered a private investor: Check the rules above and make sure you stick to them if you want to avoid all capital gains tax on your crypto!
• Offset losses as self-employed traders: It's not the end of the world if you end up being considered a self-employed trader, it comes with one big perk. You can offset your crypto capital losses against your gains if you're viewed as a self-employed trader.
• Make a donation: Cash gifts to registered charities are tax deductible. So if you sell your crypto and donate that amount to charity - you may be able to offset it against your income and reduce your overall tax bill.

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