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Switzerland’s Federal Department of Finance has decided that the rapid development of blockchain and corresponding financial instruments doesn’t warrant changes to existing tax laws, as the country’s existing legislation can accommodate the nascent technology.
According to a press release, the Swiss Federal Council first requested a report on the subject from the Department of Finance on December 7, 2018, to explore the potential impact of decentralized ledger technology (DLT) and blockchain on the country’s economy.
Swiss tax laws compatible with blockchain
The lawmakers presented their findings to the Council during a meeting on June 19, concluding that Swiss tax laws are fully compatible with blockchain technology—at least for now.
Existing legislation has “proved its worth” regarding income, profit, wealth and capital gains taxes, the report said, while the country's current VAT law “covers arrangements based on distributed ledger technology (DLT) and blockchain.” It recommended that “no legislative action is necessary as regards special tax provisions for the new instruments.”
The report’s authors also recommended that withholding tax coverage on income from equity and participation tokens should not be expanded, “due to the adverse effects for Switzerland as a business location.”
The report also advised against making changes to the law around transfer stamp tax, “due to uncertainty about the type and scope of the future use of DLT trading facilities.”
Switzerland takes hands-on approach to crypto
Switzerland’s attitude toward crypto is hardly hands-off, however. In February this year, the country tightened its cryptocurrency regulations in a bid to curb money laundering, lowering the threshold for unidentified crypto purchases from 5,000 Swiss Francs to 1,000 (around $1,023). At the time, the regulators cited “heightened money-laundering risks” as the primary reason for this decision.
Switzerland is also the first country to attempt to regulate cryptocurrency banking, with Sygnum, one of two crypto asset banks to be granted an operational license by the Swiss financial regulator FINMA, reporting “overwhelming” demand after opening its doors last autumn.