When crypto trading becomes taxable
In Switzerland, gains from private assets are tax-free. Gains from business assets, on the other hand, must be taxed as income, although losses may be deducted. The question is therefore: at what point does crypto trading constitute self-employment?
Anyone who meets all five of these conditions at the same time is rather considered a private investor, and thus tax-exempt:
- The coins/securities held are retained for at least 6 months.
- The annual transaction volume does not exceed five times the initial holding.
- The profits are not necessary for living expenses (profits < 50% of other income).
- No external financing (or the returns cover the interest on debt).
- Derivatives are used solely for hedging purposes.
Particularly with cryptocurrencies, these requirements are often impossible to meet due to the high level of activity.
In such cases, the activity is assessed as securities trading in accordance with case law. The Federal Supreme Court states commercial activity is deemed to exist if the trading goes beyond normal private investment.
Key indicators of commercial trading:
- very frequent transactions
- short holding periods
- professional approach
- use of specialist knowledge or borrowed funds
- reinvestment of profits into similar investments.
Nowadays, specialist knowledge and a systematic approach are less important; the focus is on frequency and short holding periods. Even a single criterion can be enough to be classified as a professional trader.