Taxation of Cryptocurrencies

Last year cryptocurrencies drew a lot of attention. They are penetrating more and more into our everyday life. Many people have looked into the subject, and also invested in various currencies. In terms of taxation, these currencies should be regarded as foreign currencies.

What Are Cryptocurrencies?

Cryptocurrencies are digital currencies that are not bound to anything, and are not controlled by any state. They are created, in a decentralised way, using the computing power of private individuals, who all form a huge global network that works on the basis of mutual control. An action or transaction becomes valid only when it is accepted as such by enough participants. As such currencies are not controlled by any national bank, no single exchange rate exists either. Hence, their unit price is determined solely by demand. This makes their exchange rates vary significantly.

The best-known cryptocurrency is bitcoin, which plays a pioneering role in how everyday life is being penetrated. So, for example in the canton of Zug, it is now possible to use bitcoins to pay contributions in kind.

Taxation of Cryptocurrencies

Everyone in Switzerland who creates or is paid in cryptocurrencies must pay regular income tax thereon. Owned cryptocurrencies are subject to capital tax. So the central question is how such cryptocurrencies should be taxed? Cryptocurrencies are traded in via various platforms. As the exchange rate remains free, there may be some price differences between such platforms. For bitcoin, this deviation may be up to 1%. With such exchange rate variations and largely volatile prices, the taxation turns out to be especially difficult. The Swiss Tax Conference supports the view that these currencies should be taxed as foreign ones. Accordingly, the binding value is determined at the year-end, based on the average price during the year.