Blockchain and DLT to trigger no repercussions for Swiss tax law

Source: FinanceFeeds 2020-06-22

Blockchain and distributed ledger technologies (DLT) are set to have no repercussions for Swiss tax law. During today’s meeting, the Federal Council took note of a report on the need to amend tax law with regard to blockchain. The report concluded that no special legislative amendments to tax law are necessary.

As regards income, profit, wealth and capital gains taxes, the existing legislation has proved its worth. Existing VAT law also covers arrangements based on DLT and blockchain. Therefore, no legislative action is necessary as regards special tax provisions for the new instruments.

Another area examined was the collection of withholding tax on income from equity and participation tokens. Due to the adverse effects for Switzerland as a business location, among other things, the report recommends that withholding tax coverage should not be expanded. As regards transfer stamp tax, it advises against legislative amendments at present, due to uncertainty about the type and scope of the future use of DLT trading facilities.

The report on the need to adapt tax law to developments in distributed ledger technology (DLT/blockchain) was prepared by the Federal Department of Finance on the instructions of the Federal Council.

Switzerland has been rather friendly to projects harnessing the capabilities of blockchain-based technologies. In November 2019, for example, the Federal Council announced the adoption of the dispatch on the further improvement of the framework conditions for DLT/blockchain. The proposal is aimed at increasing legal certainty, removing barriers for applications based on DLT and reducing the risk of abuse.

In December 2018, the Federal Council published a report on the legal framework for blockchain and DLT in the financial sector. Among other things, the report showed that Switzerland’s legal framework is already well suited to dealing with new technologies, including DLT. However, it also highlighted the need for selective action. In the consultation draft, the Federal Council proposed a set of adjustments. For example, in the Swiss Code of Obligations, the possibility of an electronic registration of rights that can guarantee the functions of negotiable securities is to be created. This seeks to beef up legal certainty in the transfer of DLT-based assets.

DLT

Federal Council

Blockchain and DLT to trigger no repercussions for Swiss tax law

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