Tax Newsletter December 2018: Taxation Of Blockchain And Crypto Currency

Author:Dr. Roland Böhi, Danielle Wenger and Manuel Vogler
Profession:Prager Dreifuss
  1. Introduction

    So called Initial Coin Offerings ("ICO") as a new fundraising mechanisms in which new projects sell their underlying crypto tokens in exchange for e.g. Bitcoin or Ether, have often been discussed in recent months. In order to contribute our part in this dialog we would like to discuss a fictional case of a company intending to finance the development and fabrication of its product through an ICO. In this connection we observe the different stages of a planned ICO from a Swiss tax perspective and provide an overview of the different tax issues relating to this topic.

  2. Fictional Case

    Nurse Robo Ltd. based in Zug, Switzerland plans to develop, produce and sell a robot for the nursing industry which will facilitate the daily care of the elderly. Apart from the development and the production of the nursing robot the corporation plans to create a platform on which customers will have access to the "Nurse Robo Education Program" and further services of Nurse Robo AG in connection with the nurse robot.

    In order to finance the robot and the platform Nurse Robo Ltd. will firstly launch a pre-ICO round to a limited number of investors who can purchase a pre-emptive right on a certain amount of "Robo- Coins". Secondly Robo-Coins will be issued in the course of the ICO and allow its owners to access the platform, to buy the Nurse Robot with the Robo Coin on the platform and to participate in 10% of future gains of Nurse Robo AG.

  3. Token Definition

    3.1 Legal background

    The analysis of tax issues regarding an ICO requires that the token or coin is firstly qualified from a legal point of view. At the moment there exists no binding legal qualification of tokens. However, on 16 February 2018 the Swiss Financial Market Supervisory Authority ("FINMA") published guidelines for enquiries regarding the regulatory framework for ICOs. FINMA categorized tokens according to the underlying economic function of a coin into: payment tokens, utility tokens and asset tokens.

    FINMA qualified payment tokens as tokens which are intended to be used, now or in the future, as a means of payment for acquiring goods or services or as a means of money or value transfer. Cryptocurrencies give rise to no claims on their issuer.

    Utility tokens were defined as tokens which are intended to provide digital access to an application or service by means of a blockchain-based infrastructure.

    Finally, asset tokens were described as tokens which represent assets such as a debt...

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