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Switzerland has long been a world center for the wealth management industry, with about $ 2 trillion, or 27 percent, of global offshore wealth. Since 1934, Swiss bankers and regulators have resisted the efforts of foreign tax regulators, including the Internal Revenue Service (IRS) in the United States, to obtain information on Swiss secret bank accounts. They demanded respect for Swiss law and the need to protect the privacy of their clients, as private Swiss bankers smuggled the wealth of US taxpayers from the United States to Switzerland in all kinds of creative ways. From money packets hidden in newspaper rolls to the creation of fictitious companies, to the jamming of diamonds into toothpaste tubes, Swiss bankers have helped tens of thousands of wealthy American customers escape US taxes through bank accounts. secret banking. on their famous bank secrecy laws with a little help from the US Department of Justice and the IRS Criminal Investigation Division (IRS-CI) which closed the oldest private bank and slapped the largest and most important fines for contributing to US tax evasion, Switzerland was on the brink of losing its competitive edge in rival financial markets.
But do not count Switzerland yet. By establishing a global hub for virtual currencies known as “Crypto Valley” in Zug and implementing a forward-looking regulation of the Swiss Financial Market Supervisory Authority (FINMA), Switzerland is emerging as the 39, one of the world’s leading ecosystems. According to Oliver Bussmann, the founder of the Crypto Valley Association. Johann Schneider-Ammann, Head of the Swiss Department of Economic Affairs, stresses that the country is becoming a “cryptographic nation” for the digital revolution with a flourishing market of initial coin offerings (ICO)
a new way to raise capital through digital currencies and Blockchain technology where participants invest in fiduciary money and receive “tokens” or digital assets in return. A person, project or business in need of capital creates a new type of digital coin and sells a slice of it for fiduciary money on a platform or digital exchange.
million dollars, or about 14% of the world market of the ICO, or about 4 billion dollars. The Tugos-based ICO in Zug alone raised $ 232 million in July 2017. The Tezos Foundation is the subject of at least half a dozen class actions in the United States. United on the part of those who claim to have been misled. “Many Swiss OICs are structured as foundations that have applied for a non-profit tax status and the funds raised in these ICOs are treated as a gift that can not be returned to ICO investors,” says Luka Muller, legal partner of the firm. Swiss lawyers MS. who helped set up the Tezos Foundation as well as other major ICOs.
FINMA proposes a regulatory approach to ICOs
In response to the sharp increase in the number of Swiss OICs, in February 16 2018 FINMA issued guidelines on ICOs under Swiss laws on the fight against money laundering and on securities. Under the regulatory guidelines, many IFAs will be treated as securities in Switzerland.
There are some exceptions, for example tokens used to access an already operational platform, or for cryptocurrencies that only function as a means of payment. FINMA stated that “our balanced approach to dealing with OIC projects and investigations allows legitimate innovators to navigate the regulatory landscape and thereby launch their projects. According to Mark Branson, CEO of FINMA,
Switzerland is “unofficially” a tax haven for cryptocurrency
Without a doubt, Switzerland is an attractive market. for investors and issuers due to favorable Swiss tax laws.
Cryptocurrencies are neither money nor a foreign currency, nor a financial provision for the purposes of the Goods and Services Tax (GST).
Trading in securities-valued tokens may give rise to securities transfer rights for domestic instruments at a rate of 0.15% (or 0.30% for instruments other than domes) . (19459007)
Cryptocurrencies are an asset for the purposes of capital gains tax (CGT), which applies only to a qualified person as a professional trader. Holders or investors of cryptocurrencies are subject to a wealth tax at the rate determined by the tax authorities as of December 31st of the financial year.
A value token, issued by an ICO, can be subject to a single 1 percent capital charge, unlike a debt token. Any distribution of profits on equity tokens or payments on debt tokens is subject to Swiss withholding tax at the rate of 35%.
Swiss Swiss Investors Wary of the IRS-CI
Investors in ICO tokens who are not involved in class actions should be aware of the fact that the l & # 39; IRS-CI has recently set up a special team of agents to check if cryptocurrencies are used to deceive the tax authorities. “It is possible to use cryptocurrencies in the same way as Swiss bank accounts to facilitate tax evasion,” says Don Fort, head of the IRS-CI, at Bloomberg News
The interpretations in this article are those of the author and do not necessarily represent the views of Cointelegraph.
Selva Ozelli, Esq., CPA is an international organization. Tax attorney and CPA who writes frequently on tax, legal and accounting matters for TaxNotes, Bloomberg BNA, other publications and the OECD.