Crypto has value, therefore it must be taxed. When a simple personal investment gamble becomes a profitable business, the Swiss taxman always awaits his share of your success.
Simple appreciation in price is irrelevant and does not constitute revenue by default, until there is a sale. Nevertheless, Swiss cantons tax your wealth at the end of every year. The FTA has actually published an exchange rate for Bitcoin, Cardano, etc and they are worth a lot.
The risks exist upon any transaction or exchange. Since crypto is considered as an alternative asset, a capital gain is earned every time you pay for something with crypto-money, provided you have bought it for less.
Occasional speculative trading is generally exempt from income tax, while individual entrepreneurs are subject to a progressive tax bracket on their trading income. This occurs merely because there is a thin line between a capital gain on private wealth and actual activity of trading. In the Swiss tax system, where private stock market gains are exempted, the reclassification of the administration of private assets as a professional activity has a considerable tax impact since gains that were initially exempted are now fully taxed.
Where simple speculation becomes a recurrent activity, we are in presence of an actual individual entrepreneur from the perspective of the Swiss tax legislation. A close relation with the actual profession is historically a very important indicator. In practice it is also relevant if special knowledge is applied. Such examples include a bank director, a stock broker or a financial lawyer.
“The more you know about crypto, the more likely you are to be taxed”
However, it is not decisive to have any understanding in finance, let alone the technology of blockchain. It is deemed that moderate investments are of interest to individuals, whereas risks are rather borne by professionals. This likewise explains why borrowings are of a great importance in qualifying crypto trading as a taxable activity. Where gains are again reinvested into crypto, this is an additional red flag.
What is also crucially important, is the frequency of transactions. The short period of ownership of the securities is an indication that the taxpayer is aiming for a quick gain rather than the long-term preservation of his financial assets. This might impede the rapid fire-sale when necessary to preserve the value of a quickly depreciating price of your coins.
“Holding on to your crypto is good for tax savings”
What likewise is of interest to tax administration is the importance of any such gains, even speculative, with respect to your other income. If you build your fortune on crypto, you are more likely to be considered a professional crypto trader. On the other hand, making rare and modest gains not only argues against a professional activity, but usually passes under radar, since crypto must in principle be cashed-in to be discoverable.
A dilemma occurs where you start losing money on your crypto positions. Although a trader would be able to deduct any such loss and carry them forward for up to 7 years, a private investor cannot. Private losses are non deductible and the qualification of an entrepreneur requires the pursuit of profits. Moreover, only booked losses may be subtracted. Swiss authorities have a tendency to recognise professional activity when making profits, and neglect it when making losses.
“Crypto profits might be taxed while losses neglected”
Needless to say that Swiss case law on the matter, already controversial in itself, is far from being adapted to the realities of the modern world. Access to trading is easier to anyone than it has been ever before.
Important investment is not necessary, and knowledge about the crypto behaviour is not such an enigma as the stock market used to be to the general folk some decades ago, thanks to Internet. Furthermore, while planned and systematic approach are indicators of a professional activity, many people enjoy the crypto market as a mere gamble, a speculation, a lottery.
As far as the tax practice insecurity goes, you might just want to consult a tax lawyer when cashing in a serious amount of crypto that you were so lucky to gain.