Security Tokens will not be subject to profit tax or VAT in Switzerland
In Switzerland cryptocurrencies and exchanges are legal, and the country has adopted a remarkably progressive stance towards cryptocurrency regulations. The Swiss Federal Tax Administration (SFTA) considers cryptocurrencies to be assets: they are subject to the Swiss wealth tax and must be declared on annual tax returns.
Still, the nascent security token industry is known to lack in certain aspects of clear regulatory guidance around the globe— even in Switzerland.
Thanks to the recent STO conducted by Blockstate— which featured tokenized equity— clearer guidance has arrived in the jurisdiction of Switzerland. Through its own STO, BlockState has set an example of a successful tokenised equity issuance, combining best-in-class tech solutions with market leading legal advisory and implementation by PST Legal Consulting, the law firm under Patrick Storchenegger, Board Member of the Ethereum Foundation.
BlockState’s tokenised shares combine all rights of a traditional equity holding, with the benefits of tokenised financial instruments like easier transferability, streamlined investor relations, an automated stock register, digital shareholder voting and a bridge to a compliant, regulated legal framework. Until now, there has been uncertainty around how this security token based capital raise is to be classified in terms of taxation. The central question was whether the returns from a security token offering would trigger profit and value added tax or whether the Security Token Offering would be treated as a regular capital raise, which would only trigger security tax.
A big question for Blockstate and Swiss authorities centered around the taxation of a security token-based capital raise. Until recently, Blockstate didn’t know if their STO would trigger profit and value added tax or whether the STO would receive the treatment of a standard capital raise, meaning only security tax would apply.
Now, Blockstate says Swiss tax authorities have verified that its STO will not be subject to profit tax or value added tax (VAT).The tax authorities largely followed in its rulings the arguments of BlockState and PST Legal and concluded that the issuance and the profit on the sale of own shares through a security token offering in this specific case does not trigger profit tax and added-value tax, but security issue tax. This is a unique tax clarification for the BlockState’s security token offering model and marks the first time that a Swiss tax authority has issued a ruling on the tax classification of an equity STO.
In other jurisdictions across the globe, regulatory bodies have a reputation for remaining hesitant to provide clear regulatory frameworks for digital assets.
Finally, further legislative developments will have to be monitored in the future as the supervisory authorities are paying more attention to the compliance of token issuances with securities and financial markets laws generally.
There are many great ideas for blockchain and DeFi projects, but most founders are struggling to access funds to scale. Due to this development, venture capitalists (VCs) get pitched countless times a…