Taxation of digital assets – what you should bear in mind Last year was another successful 12-month period for crypto assets such as Bitcoin and the like. It goes without saying that every crypto investor will have been happy about the price gains recorded. However, as crypto assets are also considered assets in the traditional sense, the important question arises at the start of the new year as to how they should be declared in the tax return and how they are treated for tax purposes. Capital gains from private asset management or commercial activity? Private managementSwitzerland is one of the most tax-friendly countries in the world. Private capital gains are tax-free in Switzerland, as no capital gains tax is levied on profits generated by private investors from the sale of cryptocurrencies and other assets. This rule also applies to the exchanging of cryptocurrencies with one another. As there is no tax liability for capital gains, capital losses can thus also not be claimed for tax deductions.Special regulations for professional investorsIf digital assets are generated as part of a commercial or self-employed activity, however, gains are subject to taxation. A gainful activity is assumed in cases in which an investor's activities are recognisably geared towards the systematic generation of profits. This typically applies to trading activities with a clear intent to generate earnings, qualifying the investors as a “professional securities dealer”.The distinction is made on the basis of various criteria, including the holding period, transaction volume and the use of borrowed funds such as financial instruments. As a general rule, the shorter the holding period, the higher the trading volume and the greater the use of borrowed funds, the more likely that the activity will be considered taxable commercial trading.If commercial securities trading is determined, the profits are taxable, meaning that any losses can also be offset against other income for tax purposes.As the boundaries are often fluid, investors are advised to consult a tax advisor to assess their individual situation in detail. This helps to avoid misunderstandings and ensure proper compliance with tax obligations. Important note When capital gains become taxable, it is essential to have an accurate record of the historical acquisition data (purchase prices) so as to ensure that any capital gains can be determined precisely. This means that they can be declared properly in the tax return and any unintentional tax evasion and the associated costly legal consequences can be avoided.At Maerki Baumann & Co. AG, the historical purchase data of cryptocurrencies is recorded in the system. If the activity is reclassified from private asset management to commercial securities trading, the bank can provide the corresponding profit calculation for clients domiciled in Switzerland on request.Other countries in which capital gains may be taxable: Germany (DE), Austria (AT), France (FR), Israel (IL), Spain (SP), Italy (IT), Netherlands (NL), United Kingdom (GB), United States of America (US), Australia (AU), Canada (CA), Japan (JP), Singapore (SG), Brazil (BR), Mexico (MX) and others. Staking, airdrops and mining: Is there a tax liability? StakingCrypto assets can now also be used to generate passive income, for example through staking rewards. This income is treated as interest or similar income in Switzerland and is subject to both income and wealth tax. There is no withholding tax deduction of 35%. The progressive income and wealth tax rates depend both on the amount of total income and on the canton in which the taxpayer is resident. It is important to clarify the type of staking income and its tax implications with a tax consultant, especially in the case of commercial activities, to ensure correct compliance with tax obligations.AirdropsAirdrops (free tokens) are another typical phenomenon in the crypto world, where crypto assets are distributed by protocols “free of charge” to their users. In Switzerland, assets received at no cost (airdrops) are subject to taxation. They must therefore be declared for income tax purposes under “income from movable assets” in the tax return at their market value at the time of receipt. The applicable tax rate depends on taxpayers’ total income and their canton of residence.MiningIf mining is conducted, it is generally assumed to be an income-generating activity, which is classified as being entrepreneurial in nature. Mining is therefore rarely seen as a hobby. Income generated from commercial mining must be declared as income from self-employment or a commercial activity. The earnings are calculated as the difference between the income achieved (e.g. capital gains) and the associated expenditure (e.g. hardware, electricity and operational costs). If mining is carried out as a commercial endeavour (which is usually the case) and the cryptocurrencies are used in commercial transactions, there may also be VAT obligations, especially in cases in which the cryptocurrencies are used as a means of payment for services or goods. Wealth taxIn Switzerland, digital assets are considered part of a taxpayer's net assets and are therefore subject to wealth tax. This principle applies to all crypto assets. In their tax returns, taxpayers are required to declare their precise holdings of their individual crypto assets as at 31 December in the securities register. The valuation for taxation purposes can be taken from the official course listing published by the Federal Tax Administration (FTA) on its website at the start of the year under the heading “Cryptocurrencies”.Cryptocurrency as at 31.12.2024CHF Binance Coin1 BNB =644.162505Bitcoin1 BTC =85’926.486363Cardano1 ADA =0.786863Ethereum1 ETH =3’083.556280Dogecoin1 DOGE =0.294637Ripple1 XRP =1.915808Solana1 SOL =179.620701 Note: the complete list can be found online at ictax.admin.ch. All information is provided without guarantee. Source: Federal Tax Administration Special tax advantages of storing crypto assets with a bank Income and wealth tax: at a bank like Maerki Baumann & Co. AG, crypto assets and the income they generate are handled transparently for tax purposes. Clients always have the option to order a country-specific tax statement showing the crypto assets held or a special bank confirmation for a specific reporting date. Careful record-keeping is especially important when it comes to the taxation of capital gains. At Maerki Baumann & Co. AG, information pertaining to historical data (purchase prices) is saved in the system. These details are retained upon the delivery or transfer of crypto assets and can be confirmed in a bank confirmation upon delivery.Staking: at Maerki Baumann, clients can also benefit from staking services, for example, with the associated income clearly reported for tax purposes. A bank is regulated and ensures the documentation of transactions, providing clients with a transparent record for tax purposes.Inheritance tax: if crypto assets are inherited by or gifted to a third party and held with a bank, the individuals concerned benefit from a significant advantage: the crypto assets are never lost and are documented accordingly in their full amount. What is more, they can be transferred to their respective heirs or beneficiaries without any problems. Where relevant, the purchase prices of the crypto assets can also be transferred. As a crypto client of Maerki Baumann & Co. AG, you are optimally equipped with detailed documentation to support your annual tax declaration, including tax statements, account statements, individual transaction reports for all purchases, sales, incoming and outgoing deliveries, and income, as well as confirmations of purchase prices. Conclusion The days when crypto investments were considered a niche phenomenon are long gone. Today, crypto investors can carefully analyse their portfolios and declare them in full with all the necessary information. In doing so, it is crucial that they clearly separate their private and business activities and ensure accurate reporting in their tax declarations.Holding crypto assets with a regulated bank like Maerki Baumann & Co. AG offers numerous benefits, including increased security, transparency and legal certainty compared to other storage methods. Clients benefit from improved integration into traditional financial systems, user-friendly management and a clear legal framework. In many cases, banks are also able to offer additional services such as simple conversion into fiat currencies or the storage of historical purchase data. Author: Pascal Hügli Pascal Hügli, Crypto Investment Manager at Maerki Baumann and founder of Insight DeFi, produces high-quality content on Bitcoin and crypto and contributes to Maerki Baumann's development in the area of blockchain and cryptocurrencies. As a lecturer in digital finance and crypto assets at the HWZ University of Applied Sciences in Business Administration Zurich, he has in-depth expertise in this field, which he is now also applying to the establishment of our new brand "ARCHIP by Maerki Baumann". Important legal informationThis publication is intended for information and marketing purposes only, and does not constitute investment advice or a specific individual investment recommendation. It is not a sales prospectus and does not constitute a request or an offer or a recommendation to buy or sell investment instruments or investment services, or to engage in any other transaction. Maerki Baumann & Co. AG does not provide legal or tax advice. Investors are therefore advised to obtain independent legal or tax advice concerning the suitability of such investments, since their tax treatment depends on the personal circumstances of the investor in question and is subject to change at any time. Maerki Baumann & Co. AG holds a Swiss banking license issued by the Financial Market Supervisory Authority (FINMA). Please note that Maerki Baumann & Co. AG does not provide legal or tax advice. The above information should not be considered as such. It is only an initial assessment without any claim to completeness or correctness. For a final and legally binding assessment, please contact a tax expert. Editorial deadline: 16 January 2025Maerki Baumann & Co. AGDreikönigstrasse 6, CH-8002 ZurichT +41 44 286 25 25, info@maerki-baumann.chwww.maerki-baumann.ch