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.

Bank secret or crypto are common ways for tax avoidance, but neither is 100% proof. The fruits of globalism beget transparency and cooperation, with OECD having as one of its main priorities to tackle offshore structures.

Some say that Swiss bank secret is already dead, while Swiss financial institutions continue to rely on this feature as their primary pole of attraction of questionable cash. One in eight Swiss banks is caught up in a recent scandal. Not a good statistic of opacity, is it?

Moreover, international pressure and cooperation become evermore important in cross-border investigations, tackling offshores like never before.

Automatic information exchange has indeed proven itself in addressing the bank secret and “lifting the veil”, with a whopping CHF 44 billion being spontaneously declared to avoid harsh penalties, most in fear of this new instrument. The numbers shall grow, the fear shall accumulate and the Swiss banks become ever less attractive.

Of course, lawyers and consultants do not fail to impress with their ever-growing creativity and invention of new and more sophisticated schemes. But so do the authorities, and their forces are now combined as never before, thanks to the considerable cooperation efforts within the OECD framework.

 

“Authorities become more educated, more informed, and motivated to act”

 

For Swiss, however, this is not as dangerous at a first glance, but serious suspicions of continuous and repetitive tax avoidance allow the FTA to investigate the bank accounts of the supposed taxpayer, and to retrieve such information regardless the bank secret.

Besides, even if the bank secret applies, or where offshore structures are used, there is never a guarantee that such information shall not be disclosed, including in violation of trust agreements or the law.

As shown in the recent Panama Papers and Pandora Papers, journalists and whistleblowers remain ahead of investigations, but their actions stimulate popular pressure and help authorities.

 

“Just like any other, a bank secret may eventually be disclosed to public”

 

While it is unobjectionable that the authorities develop new instruments to tackle evasion schemes related to bank secret, crypto is the new challenge. A $7 trillion tax gap is expected in the next decade as a result, this in U.S. alone, and some refer to crypto as the “new Swiss banks“.

The connection is not unfounded, since Switzerland takes pride in its crypto-valley. While it is only recently that Switzerland has allowed financial reporting in a foreign currency, we might as well see Bitcoin balance sheets in future of Swiss e-commerce.

However, there is some note of optimism.

First, just like the bank secret is not absolutely guaranteed, crypto “is not anonymous, just harder to trace“. Second, the government knows computers too. One such example is the Operation Hidden Treasure launched by the Internal Revenue Service, in conjunction with crypto vendors.

This sets an example to other countries on the possibilities of dealing with the crypto opacity problem.

In this regard, bank secret or crypto are conceptually not too much different from one another.

Skilled financial specialist are just being gradually replaced by technology. But this works both ways. Technological advancements are sought not only by the fraudsters, but as of recent are regarded as “a must” for any authority, and Switzerland is taking up the pace in this regard, although quite slowly, taking its time.

 

“Tax avoidance with the use of crypto technology can only be tackled with technology”

 

The never-ending battle between avoidance and investigation shall continue, whether against bank secret or crypto, and both belligerents increase and improve their arsenal like never before. It will be more global, more technological and more severe.

Truly, the risk is only apparent to fraudsters if concealed funds are discovered. But if they are, the adverse material effect is beyond imaginable for Swiss fraudsters. Legally, the authorities’ duty to investigate is offset by the taxpayer’s duty to cooperate.

On one hand, Swiss law abides the concept, according to which, the person who derives rights from a fact bears the burden of proof. Tax-increasing facts are to be proven by the authority and tax-reducing facts by the taxpayer.

On the other, although authorities must be “fully convinced”, it suffices to establish such facts with “bordering on certainty” after having assessed available evidence. It is permissible and often necessary for the authorities to also rely on circumstantial evidence to draw conclusions from it (so-called, natural presumptions).

 

“Non-declaration is a suitable basis for presumption that these assets originated entirely from untaxed income”.

 

Hence, it remains up to the appellant to provide sound evidence of the non-taxable source of undeclared funds. That being said, the more concealment tools are used – the harder it becomes to prove otherwise.

 

 

  1. Does the Geneva minimum salary apply to employees with a home-office in Geneva ?

As of November 1, 2020, the minimum hourly salary of around CHF 23 applies to any employee working in Geneva, regardless the place of office of the employer, and irrespective of the employee’s domicile. However, the employee should be usually performing his work in the canton of Geneva, which does not encompass irregular cases such as occasional work from home. It is nevertheless certain that full-time home-office shall qualify as regular place of work.

  1. What costs must be borne by the employer in case of home-office ?

In essence, all the costs necessary for the performance of work must be covered by the employer, including any office material used from home. This, however, does not require the employer to contribute to the employee’s rent as it would have been due regardless any home-office. The same applies to home internet, electricity, etc.

  1. Can I force my employee to work from home ?

Employment agreements generally specify the place of work of the employee. In such a case, unless the law or administrative decision requires so, the employee is entitled to perform his work from the company’s office building.

  1. Can I request my employees to return to office ?

If the pandemic situation allows, and the administrative decisions do not impose mandatory home-office, then the employees are required to be present in the company’s office during working hours, as it is usually specified in the employment agreement.

  1. Should I cover the costs for medical masks of my employees ?

If the employer makes it compulsory to wear a mask in the office, he must provide masks and pay for them. Employers are required to pay the costs incurred by their employees in carrying out their work, and the masks made available must be certified and guarantee a certain level of safety.

  1. May I dismiss an employee for refusing to wear a mask ?

Before dismissing an employee, the employer must remind the person concerned that he or she must wear a mask and ask the employee to do so. If the employee persists in refusing to wear a mask, immediate termination may occur.

  1. May I dismiss an employee if he is constantly unavailable while working from home ?

Immediate dismissal requires an irreparable breach of trust. If, despite multiple reminders, the employee remains often unavailable and does not answer the employer’s calls, immediate termination may occur.

  1. If I work full-time from home, can I still deduct costs of commuting to work ?

Costs of commuting to work are generally deductible on a lump-sum basis. The majority of legal literature considers that the employee may claim higher effective costs, but that the administration is not entitled to refuse a lump-sum deduction in their absence.

  1. Can I deduct a portion of my rent if I work from home ?

Indeed, a room at your domicile that is exclusively equipped for working from home may be considered as a necessary cost of the employee. As such, the portion of rent is deductible insofar as work from home is mandatory, as opposed to a free choice of the employee. The employee should exclusively use this room for work, and not for personal purposes.

  1. Can I deduct costs of office equipment that I assume due to home-office ?

Office equipment should be provided or covered by the employer. As such, these are not the costs of the employee and may not be deducted from his income.

  1. If I work from home in France instead of previously working in Switzerland, where do I pay my taxes ?

In principle, tax on employee’s income is due in his state of residence, or in the state of regular work where the duration generally exceeds 183 days. Exceptionally, countries bordering with Switzerland have signed protocols that allow Switzerland to continue to withhold tax on cross-border employees generally working in Switzerland, but who are currently working from home in other countries due to pandemic restrictions.

  1. If I work from home in France instead of previously working in Switzerland, where do I pay my social security contributions ?

Unlike the situation with taxes, the employee should work not more than 25% of time from abroad to be exempt from Swiss social security. As such, this employee should not work for more than 1,25 days a week from abroad.

  1. Is electronic signature allowed ?

A conventional electronic signature is only allowed for contracts that can be concluded in verbal form, which is the majority of contracts under the Swiss law. Conversely, where the law provides for a signature, only qualified e-signatures are valid.

  1. Should I indicate hours worked from home in the salary certificate ?

There is no obligation to indicate home-office days on the salary certificate (except for a few cases of employees with a company car and deducting the journey from home to work). Reimbursement of lump sum expenses and expense regulations continue to apply despite the increase in home office.