09.08.2024
Like all other investments, you must declare cryptocurrencies in your yearly tax return. In this article, we highlight what you need to know when it comes to the different investment opportunities regarding income and wealth tax.
Very few people enjoy paying taxes, but it’s unavoidable – even for cryptocurrency investments. Fortunately, cryptocurrency taxation isn’t too complicated. In Switzerland, cryptocurrencies are treated just like any other securities. Wealth tax is the most common concern for many private investors. But let’s start at the beginning.
Like other securities, cryptocurrencies are taxable assets. What’s important is working out at what rate they are taxed. The Federal Tax Administration (FTA) releases an official stock market price for the most common cryptocurrencies at the end of the year. This is based on the averages of the rates from a variety of trading platforms.
For some currencies, the FTA cannot determine an end-year rate due to a lack of representative trading activity. In this case, the value as shown on crypto information platforms like CoinMarketCap or CoinGecko may be used instead.
For most investors, gains from crypto trading (buying and selling) have no influence on their income tax. This means that if an investor buys cryptocurrencies and later sells them for a profit, the profit gained is tax-free. On the other hand, any losses made with crypto trading cannot be deducted from taxable income. However, there are cases where income from cryptocurrencies must be declared as income. This includes the following:
Airdrops involve giving cryptocurrencies away for free, either for advertising purposes or as a reward. Any Airdrops received count as income and must be taxed accordingly. The value of the Airdrops at the time they were received is what should be entered in your tax return.
When cryptocurrencies are used to support a blockchain network and bring rewards in the form of Coins or tokens, we talk of staking rewards. These must also be declared as taxable income, with their value being determined at the time the staking reward is received.
Regular, large-scale handling of cryptocurrencies can be classified as a commercial activity. In this case, any gains from trading must be declared as taxable income. Classification as a commercial activity depends on different factors such as the frequency and volume of transactions. To avoid any nasty surprises, it may be a good idea to get assistance from a tax advisor. Cantonal tax authorities can also give you help if required.
Income from cryptocurrency mining must be declared as income. This is due to the general income clause, which essentially states that all income, regardless of how it is earned, is taxable. Cryptocurrency mining is usually regarded as a form of self-employment and is therefore taxable. The market value of the mined cryptocurrency at the time it was acquired is used for your tax return.
Non-fungible tokens (NFTs) are unique digital assets often used in art, music and digital collections. Since October 2023, some special rules have applied to NFTs regarding taxation:
Decentralized financial services (DeFi) include activities such as lending and receiving cryptocurrencies. If investors are active on a decentralized credit platform as lenders, the income generated at the time of distribution is subject to income tax – at the latest when the loan reaches maturity. Anyone who takes out a loan on a DeFi platform can claim the debt interest paid in the debt register.
Crypto investments must be declared in the list of securities and assets, along with the cryptocurrency’s name. Most crypto platforms offer a tax statement that you can use as a supporting document. The tax statement includes details such as assets, transactions and gains.
However, not all platforms offer a tax statement. If you don’t have the option for a tax statement, you should take a screenshot of your wallet on 1 December or 1 January. This is important because some stock exchanges do not allow retroactive evaluations.
Cryptocurrency taxation isn’t too difficult to understand as it follows the same logic as traditional securities. It‘s usually a more difficult process for investors that have multiple wallets and who spread their transactions over different platforms. However, there is a solution: specialized platforms help consolidate all of an investor’s wallets and produce a single, comprehensive tax return.
If you don’t like the sound of this and would prefer to be on the safe side, a bank is a good option. Banks often make the declaration process simpler by integrating all items into a single asset statement.
As mentioned at the beginning: there’s no getting around the fact that cryptocurrencies must be taxed. However, by understanding the tax requirements and using the available support to help you, you can make filling out your tax return much easier. Filling out your tax return also has a nice side-effect – at least in successful investment years: investors can review their financial successes and look forward to the next investment year.
Whoever trades cryptocurrencies independently with PostFinance has multiple advantages, such as the annual asset overview for tax returns.
The information given here should be used as a general guideline. Each individual case comes down to its specific circumstances. If you are unsure about anything or require assistance, we recommend talking to a tax advisor.
