What tax do I have to pay on cryptocurrencies?
, 3 minutes
Bitcoin, Ether, Stellar, Dash … Even private investors with limited means have now become interested in cryptocurrencies. Including our customer Yves, an IT specialist from Zug, who holds cryptocurrencies in his personal portfolio. He has a number of questions on his declaration obligations and the tax consequences.
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Tax questions – answered simply:
Yves: I invested in a number of cryptocurrencies for the first time back in 2018, around 20,000 francs in total. Do these cryptocurrencies have to be declared, and if so, how?”
Pavla: The ownership of cryptocurrencies is economically comparable to the ownership of cash or precious metals. In other words, cryptocurrencies too should be declared in Swiss francs in your tax return, under “Other balances” in the schedule of securities and other assets. You can prove your holding of cryptocurrencies by printing out a copy of the digital “wallet” in which your digital currency holdings are stored.
Since I purchased my cryptocurrencies, their performance has varied greatly. Which value should I declare?
The ESTV (Federal Tax Administration) publishes a standard year-end rate for a number of virtual currencies. This figure is an average of the rate published by various trading platforms. This is the figure that should be declared as the determining value for asset tax purposes. If no official rate is given by the ESTV you should choose the rate published by the trading platform through which you typically process your transactions. If no current rate can be determined, the original purchase price of the cryptocurrency in Swiss francs should be used.
What are the tax consequences of any capital gain/loss?
The capital gain when selling cryptocurrencies held as part of your private assets is tax-free. Similarly, any capital loss cannot be deducted, and is therefore irrelevant for tax purposes. By contrast, if cryptocurrencies are held as part of business assets or traded commercially, the realised capital gain is subject to mandatory tax as independent employment income. In this case, realised losses can then be deducted for tax purposes. Drawing a line between private and business assets is not always easy. In the event of any uncertainty in this respect, we recommend that you have this clarified.
In addition to digital currencies such as Bitcoins, there are also a number of other digital assets with special characteristics, such as tokens. If a token grants additional rights that go beyond the rights that come with typical digital currencies, the tax consequences should be evaluated individually according to the particular characteristics.
In the future, I would like to “mine” cryptocurrencies myself. Is the income generated from this process taxable?
Yes. Any remuneration for so-called “mining” is taxable as income from independent primary or secondary employment. The income generated should be converted into Swiss francs at the point of receipt.
Note: This practical tip applies only to cryptocurrencies that are comparable to Bitcoins.