Switzerland is keen on the automatic exchange of information (AEOI) for crypto. This makes little sense, and the USA is stepping out of line.
The OECD wants changes to the Automatic Exchange of Information (AEOI).
In addition to far-reaching changes to the existing regulations, a separate AEOI for virtual assets is being presented.
In force from 2026
Switzerland can’t wait to subject crypto to full monitoring by state authorities.
In May 2024, the Federal Council opened the consultation on the expansion of the international automatic exchange of information in tax matters (AEOI).
The extension concerns, among other things, the new AEOI on crypto assets and is due to come into force on January 1, 2026.
OECD pulls the strings
At its meeting last Wednesday, the Swiss government already identified partner countries that could be considered for the exchange.
However, a concrete exchange should only take place if the partner states are interested in exchanging information with Switzerland.
In addition they must fulfill the requirements of the OECD’s reporting framework for crypto assets.
Aiming for transparency
In Switzerland, the AEOI on financial accounts came into force on January 1, 2017.
Data has therefore been exchanged with partner countries since 2018. The aim of the AEOI is to create tax transparency in international relations.
However, Switzerland was one of the first countries to commit to implementing any further developments relating to Bitcoin, Ethereum & Co.
Crypto profits tax-free
The AEOI on crypto assets should follow the same system as the AEOI on financial accounts.
Officials should be able to exchange information on transactions involving crypto assets automatically and at regular intervals.
But apart from just a lot of bureaucracy, this makes little sense.
In Switzerland, no taxes are generally payable on the sale of crypto holdings from private assets.
System like Super- or Cumulus points
At most, income from holding and lending crypto assets via staking or pools as well as the use of DeFi protocols and airdrops could constitute taxable income.
But officials may be keen on the wealth tax that also applies to virtual assets.
However, many coins fall into the category of Cumulus and Superpoints from customer loyalty programs, such as Coop and Migros.
Many points of contention
And there is another aspect that plays a role in this topic, as the renowned law firm Bär & Karrer points out.
Due to the decentralized nature of crypto investments, for example through the use of different wallets, as well as the often-ambiguous qualification of the various categories of crypto assets as investments, correctly declaring the resulting income and values for income and wealth tax purposes can sometimes pose a certain challenge, it said.
The distinction between private asset management and commercial trading in crypto assets, and thus the distinction between tax-free capital gains and taxable income, again often poses challenging questions, the lawyers added.
Crypto millionaires in the minority
The Confederation itself shows just how much confusion can arise.
On the one hand, it says that the consultation will run until September 6. But on the other hand, it officially says until November 15, 2024.
For the crypto world, however, much like sniffing for truffles, the nosey Swiss officials aim to crawl around with a lot of effort trying to find tiny little bytes of crypto profit.
Definitions, holding periods, commercial or private trading will usually never be clear-cut.
And there are only a few crypto multimillionaires anyway, who seek professional help with tax matters because they are always in the public spotlight.
Switzerland helps dictatorships
From ‘A’ for Albania, to ‘C’ for Cyprus, to ‘N’ for Nauru and ‘V’ for Vanuatu, everything is now on the Federal Council’s list.
Naturally, countries such as Qatar, Saudi Arabia and China should also be included.
In future, Switzerland will provide them with information on who is a crypto millionaire and these countries can then intercept those individuals immediately.
USA steps out of line
However, one of the most important countries in terms of crypto is not included in the Federal Council’s list.
That being the USA, which, according to the consultation report, has announced that it will ‘probably’ implement the AEOI on crypto assets via bilateral agreements.
It is therefore clear that the USA does not want to link the issue of financial accounts with digital assets.
Basic principle violated
However, Switzerland would like to conclude such an agreement with the USA for crypto assets. And thus roast an extra hot dog for the Americans.
The negotiating mandate in this regard is the subject of a separate bill, the Federal Council announced indirectly.
All of this means a lot more effort for normally overworked Swiss tax officials.
A fundamental principle of the country, to trust in its citizens and therefore also in tax honesty, will be further undermined with an AEOI on crypto assets.
19.08.2024/kut./ena.
