Swiss Canton Ticino: clear rules for taxation of Bitcoin attract enterprises and capital

Switzerland continues its policy of regulating cryptocurrencies regarding taxation and giving them an official status in terms of enforcement in the field of fiscal policy.

After regulating the initial coin offering (ICO), Switzerland has established itself as the most convenient platform for investors and enterprises, engaged in the development of cryptocurrencies.

The secret of the success of the administration of the Italian-speaking Canton Ticino is extremely simple: transparency and transparent rules for taxation of crypto assets.

Swiss resident taxpayers were notified in advance about the taxation regime for their transactions with virtual currencies.

In accordance with the established practice, in the absence of specific directives from the federal authorities, the cantonal administrations determine the tax policy themselves, in particular for crypto assets.

Pending the adoption of a comprehensive financial and legal regulatory document of federal significance, the cantonal administrations decided to consider cryptocurrencies as full-fledged foreign currencies.

In particular, in the Canton Ticino, property tax is 0.65%, and in the residents' tax return is entered in the column "movable property", under the heading "Securities and other allocation of capital" or "Cash, bank notes, gold and other precious metals".

To facilitate the completion of the tax return, the cantonal authorities issued a memo on the calculation of the exchange rate where, for bitcoins especially, an official exchange rate is established at the federal level. For other currencies, the exchange rates of major world currencies are applied, and the resulting value is converted into Swiss francs.

In case of cash in a cryptocurrency, used by enterprises - legal entities and individual proprietors as payment for goods and services, as well as for mutual settlements, the Swiss federal authorities apply general principles of financial reporting. To assess the value of crypto-currencies that are at the disposal of enterprises - tax residents of Switzerland, their book value is taken into account for tax purposes.

The income, received in cryptocurrency, from the taxation point of view, is treated as income in foreign currency, which is then converted into Swiss franc.

The final settlement amount in Swiss francs is then entered on the tax return.

Tax and financial institutions at the cantonal level explain how to provide the evidence of cryptocurrency’s availability in the absence of official banking institutions, issuing official documents of strict accountability for cryptocurrencies.

The cantonal administration invites taxpayers to provide self-certification, that is a statement that substitutes the official certificate. Along with this, they should also provide a printed screenshot of the website where they observe the data on the cryptocurrency, available in their possession.

Another exciting feature is the practice of applying financial regulation to global actors/globalists (foreign entities that enter into tax agreements with the Swiss authorities to obtain residences) — in this case, property tax is applied, but only if a cryptocurrency is exclusive of Swiss origin. If it’s kept on mobile applications, websites or in foreign banks, it won’t be a subject to taxation.

Purchase and sale of cryptocurrency are treated as traditional currency-exchange operations that are already taxed on property, and, therefore, are not subject to any additional or double taxation.

For Swiss residents-natural persons, profit or loss is profit or loss from a capital and, in the first case, is not taxable, and, in the second case, cannot be written off from the tax return.

One exception: natural persons — Swiss residents, who make frequent transactions with cryptocurrencies can be equated to "trading in securities" and, in this case, their income subject to taxation.

There are also borderline cases, for example, the taxation of mining, initial coin offering (ICO) and start-ups with capital in cryptocurrencies.

In this case, the cantonal administration invites the persons concerned to submit documentation to the tax and financial administration for a decision on the rates and categories of taxation in each particular case.