Declaration of Bitcoin

More and more people are jumping on the Bitcoin trend and buying some of the currency. The past has shown that a lot of profit can be made with Bitcoins, but there can also be big losses. However, it is unclear to most Bitcoin owners how trading Bitcoin affects taxes for Swiss taxpayers. 

Under civil law, ownership of a Bitcoin is equivalent to ownership of a digital information unit under property law. For tax purposes, the Bitcoin is to be qualified as a pecuniary right to an asset, which is included in the net assets according to Art. 13 para. 1 StHG. 

Declaration in the tax return

As with cash, smaller amounts can be disregarded in the declaration as long as they are actually used for general and regular payment transactions. However, if the taxpayer holds amounts that go beyond regular payment transactions, these must be declared in the net assets. 

The taxpayer is obliged to complete the tax return using the official form and to submit all enclosures. This raises the question of where to list the Bitcoin wallet in the tax return. The securities register could come into question. However, this is not suitable for the declaration of Bitcoin, as only securities and credit balances with a corresponding counterparty must be listed. Since Bitcoin qualifies as a monetary right in an object, it cannot be listed in the securities register, but must be included under the heading “other assets” at the corresponding daily rate.

The taxpayer is generally obliged to provide the information necessary for the assessment of the tax authority and to provide information and certificates upon request by the tax authority. In the Bitcoin system there is no third party that can provide information on year-end holdings, which is why the owner of Bitcoins cannot provide a certificate.  Therefore, the tax authorities are solely dependent on the information provided by the taxpayer, although the printout of the year-end inventory could serve proof.

Valuation

The price of bitcoin is highly volatile. Due to this, it would be disproportionate if only the price at the end of the year were used as the tax assessment basis. For this reason, the FTA determines a value for the Bitcoin that is decisive for the wealth tax by calculating the average of the prices at the end of each year. However, this calculation is not always accurate and is merely a recommendation to the cantonal tax authorities. The rates of the FTA should therefore not be adopted unquestioningly.

Profits

It is not unusual that profits arise from trading with Bitcoin. The capital gain from movable private assets remains tax-free pursuant to Art. 7. Para. 4 lit. b StHG. Only if the Bitcoin qualifies as business assets is tax payable on the profit. However, a business activity can only be assumed very restrictively, for example in the case of trading with the help of algorithms or mining.