Start a Business in Zug Crypto Valley
Start a Business in Zug Crypto ValleyUpdated on Monday 15th July 2019
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Zug’s economic sectors have drastically modified in the last decades, from traditional activities such as manufacturing and fishing, to modern activities, mostly carried out in the financial sector. Zug positioned itself as one of the top destinations for investments in the field of cryptocurrencies, a new field of activity in which more and more businessmen are willing to invest.
Having a low corporate taxation system, Zug is one of the most appealing Swiss regions for starting a cryptocurrency business and our team of lawyers in Switzerland can provide legal advice on the applicable regulations in this sector. Foreign investors can also obtain information on the types of documents needed for the registration of crypto-business in the canton of Zug.
Regulations for cryptocurrency businesses in Switzerland
Cryptocurrency businesses operating in Switzerland are included in the field of financial services, which are generally delivered by companies that have to obtain an approval for their operations issued by the Swiss Financial Market Supervisory Authority (FINMA). However, for the moment, companies performing activities in this sector do not need a specific license issued by FINMA, as the institution has not yet created a complete legal framework applicable to virtual currencies.
As a general rule, cryptocurrency activities developed in Zug, Switzerland, are not regulated under a clear legal framework, but certain business operations fall under the regulations provided by the Anti-Money Laundering Act. For example, the following operations have to be performed under the provisions of the above mentioned Act: buying/selling bitcoin for commercial purposes and operating on trading platforms.
The operators of the aforementioned activities have to verify specific rules available for these activities and it is compulsory to obtain specific documents issued by the local authorities; our team of Swiss lawyers can offer further information on this subject.
It is necessary to know that the Swiss legislation does not clearly define what a cryptocurrency is, but there are special reports that provide an approved definition. The current definition of the cryptocurrency in Switzerland is also used by FINMA, which stipulates that a virtual currency must be considered an asset, as it is traded on virtual markets.
This definition is important, as it can have specific tax implications for the users of cryptocurrencies; in this sense, it is necessary to know that the Swiss legislation distinguishes between three main types of virtual currencies, which are also known as tokens. The Swiss tokens are categorized into the following: payment tokens, utility tokens and asset tokens.
What are the global market trends for cryptocurrency investments?
The usage of cryptocurrency is steadily increasing at a global level, since more and more persons became familiarized with this type of currency. Most of the investments in cryptocurrencies are concluded through Bitcoin, which is the most popular virtual currency that is used at a global level. The second preferred virtual currency is represented by Ethereum. Businessmen interested in investing in cryptocurrencies should consider the below mentioned aspects:
- • the total value of the Swiss cryptocurrency market can reach $66.68 billion, once this new industry will enter the insurance and financial market in this country;
- • this represents the highest value compared to other European cryptocurrency markets (in comparison, the Danish market has an estimated value of $16.47 billion);
- • currently, only 2% of the cryptocurrency users in Switzerland make daily payments by using cryptocurrency;
- • this falls in line with the average share available in other European countries (Spain, Germany and the Netherlands also have a share of 2%);
- • it is also necessary to know that the transactions concluded at a global level by using Bitcoin represent 1/3 of all cryptocurrency transactions;
- • in 2018, the global cryptocurrency market had a total value of $600 billion;
- • the value of a Bitcoin stood at $24,82 in January 2011;
- • in comparison, in 2017, the value of the same virtual currency stood at $180,441.
What is the tax system applicable to Swiss cryptocurrencies?
Even though the cryptocurrency sector is still new on any given market, including in Switzerland, businessmen or those using cryptocurrencies can become liable to taxation for operations concluded with various types of virtual currencies. Our team of Swiss lawyers can provide an extensive presentation on the tax obligations that can be imposed to natural persons or legal entities; below, we present the most common tax regulations available for cryptocurrencies:
- • the wealth tax – the tax assessment in Switzerland is done by converting the virtual currencies into the Swiss franc (the conversion rates are established by the Swiss Federal Tax Administration);
- • the income tax – the capital gains applicable to the income obtained from cryptocurrency transactions made by natural persons are not taxed, but the capital gains obtained by Swiss businesses will become liable for taxation in Switzerland;
- • the capital tax – it is imposed on Swiss companies and businesses obtaining income from cryptocurrencies must declare the cryptocurrencies at their acquisition costs in the yearly tax assessment forms;
- • the corporate income tax – another tax available for Swiss companies, which can also be applied to corporate income obtained from cryptocurrencies;
- • the value added tax (VAT) – businesses in Switzerland do not have to pay the VAT for cryptocurrency related transactions.
What are the taxes for Swiss cryptocurrencies users?
We mentioned above the types of taxes that can be imposed to Swiss individuals and corporate bodies. In the case of natural persons, the only types of taxes that can be applied are the personal income tax and the wealth tax; the latter type of tax is imposed on cryptocurrency operations just like it would be applied on foreign currencies.
The users of cryptocurrencies, who are natural persons, will need to pay the wealth tax in accordance to the value imposed by the local authorities at the end of the financial year. The Swiss Federal Tax Administration establishes a threshold, which can then be used by the other Swiss cantonal authorities with the purpose of determining the level of taxes natural persons must pay. The tax is also imposed if an employee of a company receives virtual currencies as a part of his or her salary. Our law firm in Switzerland can offer further details on this subject.
Tax advantages of Swiss cryptocurrency businesses
The canton of Zug provides an attractive corporate taxation system. For example, companies operating in the cryptocurrency sector are exempt from paying the value added tax (the tax is not applied to bitcoin transactions). Investors can also benefit from the provisions of the double taxation treaties signed here. More details on the registration and the taxation of cryptocurrency businesses can be provided by our lawyers. Please contact our law firm in Switzerland for consultancy services on this matter.