Crypto Tax & Accounting AMA

Transcript

it's my pleasure to welcome you to this tax and accounting event so tax and accounting as I was joking at the beginning of this session is uh sometimes regarded as you know as the boring topic but it's actually one of the most important topic that is usually kind of underestimated by a project holder and we thought it was interesting to discuss with the real specialist and to have the opportunity for you guys that are joining uh us right now have the opportunity to ask a few questions and also certainly to get a few highlights so again the the goal today is to speak during one hour it's not like a very burdensome or cumbersome

type of uh of discussion we just want to go right to the point it's also right on point because this is a very practical topic and it's really an end of the year topic because we'll need to to uh to you know finish this the the the the accounting year on the 31st of December so it's a very uh a recurring but important topic before we go towards the the question that you might have I will just leave one minute to the two speakers to introduce themselves who they are what they do so you know you who you're talking to uh will of course begin with Suzanne who is currently in space

yourself um yes and I I have a you'll hear my blaring American accent but I am actually based in London um not in space but um I like to the background it's just it's sort of the global nature of crypto I suppose it was what I was thinking about I'm the global head of Accounting Solutions for Luca and Luke as a data and software company that serves primarily um uh institutions you know some of the biggest institutions you will have heard of and all different kinds for miners to exchanges to hedge funds and fund administrators to

corporates you know that hold crypto in their ballot sheet we also do serve individuals um but to that you know that's you'll you'll hear me talk from a institutional background primarily um I have a background in a long background in in accounting and tax reporting and even better tax professor at University because somebody has to do that but it was a long time ago so that I did that but I also served as a staff member at the International Accounting Standards Board leading some projects there so this is an area that as Gabriel said is is not always it's a sexy topic but I happen to love it and I imagine my co-panelist Federico loves it as well so

thank you so much I'm happy to join today so you understood top-notch speaker only and then yes yes with pleasure so my name is verico albrar I am an attorney at law in Geneva Switzerland I have been admitted to the bar in 2012 and got my my lawyer license in 2014. since then I have been working in several law firms and I held some positions as well but the tax administration both at the continental and at the federal level in Switzerland

I launched my own Law Firm one year ago a little more than that like 15 months ago and I'm a tax lawyer it's my main field of practice even though I do other things as well in the field of commercial law as well my background is mainly legal and I I I used to practice in the field of cryptos or I have a lot of exposure to uh to crypto issues since uh yes about three years ago that's it thanks a lot for uh this kind this nice introduction we already have a few

questions so I'll jump right in uh so we have the Eric Martinez durantes and Annie Marie Patrick's Patricia nissu sorry I couldn't pronounce that right uh in a few and it's actually linked to to the the pre-conversation we had just before so I want uh so they want to know how do I determine the value of my digital asset for tax purposes and uh any wants to know she bought Bitcoin 80 and eat 20 in 2016 probably never cashed out it's actually linked to the first question that I wanted to ask you guys Susan uh you work with with the institutional um how do we make those tax reporting

can you give us like a quick uh 101 crash course on you sure what should we take into account how how do we value you know those assets Etc it's a great question it's a great place to start and I'll step back one or two steps and then and then make sure I cover it you know and then also welcome thoughts from Frederico as well you know one of the things you sort of have to start with and this is true everywhere in the world and we we gluco helps companies and individuals to less degree but um everywhere in the world so the thing you have to step back and and ask is um with with especially with respect to

taxes is what I is what is what I am doing or holding taxable at your end yes or no and then if it is we always then have to ask what kind of of um item is it for Taxation and often it breaks down between something like is it considered a piece of property and so you'd have if you'd have a capital gain or loss or is it income you know so what we call ordinary income coming in so if you were paid in crypto for instance often that's an ordinary income which has its own tax sort of the standards and rules around it versus if it's a piece of property being viewed as piece of property by your local tax

authorities then it has often a different sort of set of um of tax rules associated with it but so once you enter into the realm of and what i is what I did this past year taxable or not then then we have to Value it and so one of one of the things that is often true is if you've just held it for the whole year like you bought it you know last year even this year you just held it in a wallet whether you're an organization or an individual often that is as the value of it changes for tax reasons it doesn't necessarily imply a taxable event has occurred over the

year for accounting rules that's a different story but but let's just stick with tax for now and so but if you're moving it around that's when you enter into or you're receiving it and not just buying it but let's say somebody's paying you your wages then you have a taxable event and then you have to value that and one of the things Luca does for instance and I'm not trying to sell our product but we're an example of a kind of firm out there that can help with that is it helps companies assess What's called the fair market value at the point in time that you part with or receive your crypto and and sometimes

it's actually pretty easy so and sometimes it's complex and so let me start with the easy thing and then I'll pause and make sure Federico can chime in as well the easy the easy part is if I receive wages in in let's say Bitcoin then it's it's the amount of you know the fair value on the day I received it is you know that transaction you know I'm paid you know my my wages in Bitcoin is just that amount or if I'm paying us for goods and services and the goods and services are worth you know ten thousand Swiss Francs then it's that's the value of your crypto sort of at that time and so so sometimes it's

super easy and other times you need to step back and have a a software like Luca that can literally sort of look at what's going on across all the exchanges main exchanges see what the prices are see where they are you know what's going on with arbitraging and where the volume is in the exchanges and then that helps determine where the price sort of goes and that that we can talk about in more detail I don't want to um sort of make everybody sort of glaze over but but there's there's often easy ways but then there's often transactions a little more complex and Frederica let me let you chime in too or Gabriel if you want to what 101 is really if you have a you

have a legal person so if you created a company eventually it could be worth it if you're like a physical person who made a lot of money to creative and enjoy your company but you most certainly need the right tool to actually assess handle and have everything kind of encoded to actually present the tax reporting in a in a proper way to the authorities that's what I got and that's important that's a really important point is that the tax authorities will want to know where did you get that their value you know and so it is wise and we I never you know want to um say that I'm giving you formal tax or accounting advice but I can tell you best practices are good ideas and it's wise to sort of have a very good set of

documentation whether you're a company or an individual here's where I got this value from here's how I approached it and here's the tool I used and then I'll follow it's just sort of kind of good good wisdom out there so Federico so how would you uh what advice would you usually give to someone who tell you you know this kind of typical situation of someone who was not fully organized on a very uh professional way let's say philosophic during the bull run or the bear Market because shocker you can make money in both situations uh you made a lot of money you were not really organized you just sold it off

and and got a huge the huge uh Factor how is in French you believe you're rich but no the tax authorities are around the corner what do you say to to someone who comes to you with such a use case well first of all it's uh always too late uh afterwards to you know to to to think about what you do what you have to do or what you can do for past actions and past gains uh so my first advice would be uh to go and seek for advice before starting to invest into crypto uh currencies and tokens Etc um usually um you know in my field of practice as

an attorney at law people come to see me afterwards and we try I mean a topic that that is um that comes really often my Law Firm is uh you know in Switzerland capital gains are exempt uh from tax and people who hold uh cryptocurrencies and sell uh those cryptocurrencies usually will rely as a capital gain that hopefully will be free of tax but of course when there is uh when it comes to a huge profit the tax administration won't be uh won't agree with this interpretation and in Switzerland there

is a way for the administration to convert uh or let's say convert but it's not the exact terminology to convert this capital gain into something which is taxable and what do they look well they will look at the you know the frequency of the operations uh uh those uh they will look if the people I mean the people involved I mean the the taxpayer went or not into debt and these kind of things that there are several criterias and what what's important to know is that those fruit areas are not um uh you know there are several like five or six and one only one of the those

criterias uh can be enough for the tax administration to consider you uh as a an independent person with a gainful activity and then your capital gain won't be tax exempt but will be fully taxable at the tax rate of a person uh I mean of the tax rate of natural person namely well between 15 let's say and 40 percent in Switzerland which is a bad surprise so in order to avoid this what should be done at least for someone who is thinking about investing a lot in crypto currencies is we seek for advice beforehand uh I mean for profit

professional advice and of course I'm not trying to sell anything here but to look for professional advice beforehand in order to you know to get the things organized the the way to so it's possible under in Switzerland at least but is it like something common uh the person I knew was for example the missile in Dublin so of course you're not an expert on on a foreign tax law because that's how low is you know you always uh only the the the the expert on your local law but is it something common is it something that it exists also in other jurisdiction or is it really a Swiss specific to have this exemption no this

is a sweet Swiss exemption yeah I guess uh I've heard I think lately about other jurisdictions uh where uh this may occur but no really it's something really really Swiss and as it's you know it's it's an exemption uh and all exemptions to to taxes are really um you know interpreted in a restricted way so it's important to you know to prepare the work beforehand okay so I think that sorry I think it's such a wonderful you know point to me to sort of get advice beforehand especially if you're going to be active at all because that's in all countries and it is

um you know what I've seen across the countries that you know the the institutions that we serve is that it this is a is is quite a unique thing to Switzerland where there is this exemption from capital gains for individuals until you get you cross this threshold of being super active whereas let's say in the UK right now you moving things even you know from wallet to wallet can can create a taxable event so it can happen quite quickly so the the advice beforehand is really smart especially if you're going to be doing things for lack of a better way to say it and you don't just have sort of this Buy

and Hold strategy I suppose I I believe I believe that it's a it's a universal uh good advice you know just to say be smart think ahead uh what else to keep in mind that I have a um who asked you know the concrete use case so in Switzerland if I buy 10 Bitcoin in 2017 at 1.5 K I sell it in 2021 at 69 case value do I owe a personal uh income tax on the benefit so he says 54k yeah but I mean yeah he made 500k the the answer will be depends I'm pretty sure because

what is his profession et cetera but eventually this exception might apply yeah so the the the the exception might apply or even should apply as a principle um depending of course of uh I mean if we're not talking here about a professional let's say it's a person uh here I mean Martin we can imagine that he has a business in another field which has nothing to do with you know the financing World Etc and he invests uh money into the the crypto Market uh then it should be as a principle considered as a capital gain exempt from

tax but as the amount here is huge as I said before just because of the importance of the amount uh the tax administration might consider that the exemption here except the exception here is uh is met and of course there are conditions to this but the tax administration where I used two words there are really you know creative when it comes to uh you know the the application of those different conditions so um so sorry I would like simply to uh because Rick Rossman wants to have for example more details about that can you

give the trash or water so uh what federal request is saying is basically it's an Administration so basically they have power of life and death over you know the the text that me and the person okay it was like a few key points that helps us pinpoint exactly you know if I might call in or out so please okay so we have in Switzerland uh a regulation which is uh well it's not a regulation form and it's a circular so uh it's something uh you know from from a point to a legal point of view is not as uh formal as a law but let's say a regulation uh that is pretty

um comfortable for people who do not uh make much um trading with their you know shares uh cryptocurrencies and stuff and if they do not meet some thresholds for instance they do not sell or buy and sell within a framework of I mean of six months they can be pretty sure that they won't be considered as a professionals and they won't be taxed on capital gains but most of the people I mean 99 of them people who invest in markets they won't met the condition of this circular and when you are not when the conditions of this circular are not met then is only Case by case and the threshold there is not

no threshold I cannot say you know 50k you will be tax exempt and 100K you won't be um there are criterias and I have the criterias here they're written in French so excusing before the bad translation but I mean mainly what they're going to look is the systematic character of your activity the fact that you held your cryptocurrencies not for a long time but you made you know some of the trading business they will look at the the link between your professional activity and the trading then we'll look at the as I said before if you if you go if you went

into depths or not and they will look at uh you know the the investment what you do with the with the capital gain do you reinvest the capital gain or do you keep it you know in a safe uh bank account that's it and as I said before one condition is enough to consider that you're a professional uh and this is why you know the condition is this analysis is pretty pretty hard so I I would like simply to to wrap up a little bit those questions and come back also uh with a question for Susan but long story short does it make sense once you've done your imagine you're not a professional you made a lot of money

because you had nfts or any type of other tokens note that nft can be kind of a sub case because sometimes it can be considered art Etc but will this not enter into that imagine you made a lot of money once because you you invested at the right time at the right place is it worth it you know even if you you to create a company or to organize yourself under the umbrella of a legal person and eventually use you know the the Lucas system for example for accounting and get more professional or is it because as I understand the correct if if I'm correct it's kind of a even if it worked it's kind of a one-time exception uh you know this uh could it work like every year for like

10 years can I make like 200k like it depends yeah it really depends you know you can you can it's not even a one a one at a time exception for application uh I I I had the case of course not in the in the cryptocurrency world of a person who had a collection of red wine bottles uh in his uh Cave for like 20 years and uh he sold uh each collection for uh I don't remember the numbers but it was something important uh it was a one uh time uh operation and uh did the tax administration considered that it was a taxable event so

then he he challenged the series but you know you never know you never know it's kind of complicated I wonder if I could just point out one quick thing and then happy to to follow up in your question too um is that if and this can become relevant right now when if if you do fall into that exception for capital gain where it's you don't have to pay tax on it the converse is also applicable where if you have a capital loss if you lose and you fit into that exception you don't get the deduction for that you don't get the benefit of

the law so if it's it's something to keep in mind is that both it's parallel so if you fit into you don't get taxed well guess what you also don't get the benefit of a deduction if you fall into that and it's just something to make to make sure we we touch on before we move on I think yes I I do agree but what is uh dramatic is that you know Tax Administration Administration in Switzerland at least could consider that you're a professional you know during year one and they can potentially change their minds three years later and pretend that you're not a professional anymore so that if you

occur losses you cannot deduct them this is really something that could happen not frequently but this is a scenario that's one one cannot avoid this is the recurring problem of having you know authorities that are in the end you know the final judge kind of the decision even though you can technically you know have a report at the terminal you know you still have uh those uh those authorities that can decide on how they want to interpret the law uh Susan I wanted to ask you because uh some of the questions that we have in the chat discussed uh this point so basically people wanted to know

um how do we consider from an accounting point of view cryptocurrencies or tokens in general um can you give you yes yeah sure a few different situations if I have a Bitcoin if I have like a security token how do I do what do I present to the authorities how does it work so so this is this is a fascinating thing that is often surprising to folks that and it you know I've had to talk about it in the U.S as well because our U.S Congress is contemplating you know treating some you know Ethan Bitcoin as as a commodity and calling it formally it's a commodity and

that can happen with Regulators around the world whether whether it's you know the FSB talking or the Swiss authorities talking and saying for our legal status purposes as a regulator here's what here's different kinds of categories that they fall into and here's the here's the hitch with that or the hiccup is that the accounting rule makers don't care what the legal authorities The Regulators call it so and and they could call it they could call it a blueberry you know like a fruit and the account accounting authorities will say under our rules and definitions here's what it here's what

it is and often people don't realize that that those things aren't joined up there's not joined up thinking there the accounting standard Setters whether it's the U.S ones or the international ones and often the local Gap you know ones the Swiss local Gap have their own definitions so what you see um right now uh is many or most of them are treated as a intangible asset and an intangible in asset with an indefinite life it's a very specific kind of intangible asset or if you are in that position of your trading regularly you you can call it

inventory or inventory or a financial instrument but it literally you have to go to the accounting rules and you have to see where your this goes back to your particular activities um kind of land you it's sort of a combination of how you're using the crypto and what kind of company you are if you're a company and then you find the definition the appropriate definition and so if you're in a company that is actively trading an investment company then you can either have it be uh fall under Financial instrument accounting or inventory accounting if you are you know the world's biggest holder of Bitcoin is an

American company called microstrategy and they make software and and so for them their Holdings of Bitcoin are this specific type of intangible asset and that's true under U.S gap or IFRS and then I can talk more about the accounting rules that fall you know sort of the things that falls out there's some International standards there is yes there is you still have already few things yeah but maybe you said article can you can you also explain from us Swiss point of view how how can we consider for example Bitcoin I know that Bitcoin might be considered you know sometimes as a can we can we hold an accounting only using Bitcoin or do we

still need to use a Swiss franc by the end of the year can we how do we translate like a Bitcoin uh wallet into the accounting and what does it mean you know from a tax oh yeah at the end of the year how does it work you know well in Switzerland uh the accountability must be held in known Swiss Francs or at least you have to um yes you you have to make the the the the translation so there is a list an official list in the website in the tax administration website of the Main cryptocurrencies and you have to work with their this list with regards to the main ones and for

the others uh you have to go on the platform and make the you know the change your yourself but you have to work with Swiss Francs yeah okay and if if I have like 10 Bitcoins uh with two different use for example I use the 10 Bitcoins as my treasury for the companies this is like use case one I use the I use it to pay like uh I I exchange it to Fiat to pay like a service provider or just you know a blockchain transaction or other stuff this is use case one and the use case two I'm the investor I I created a company I bought like uh the micro strategy type of thing it's a it's an investment that I will hold for like 10

years because I believe in the cryptocurrency in a as an investment how do you treat it from a tax and accounting point of view maybe Susan maybe Federico if you want to Suzanne I guess like I'll start with the accounting because it that one's the that's fun and yeah I mean it's not fun um without using good software tools um uh like but uh because we do that you know help do that for you but it if you're an investment company you do what's called Mark to Market so you mark to the fair market value and with your accounting advisor you know your auditor you know it can be daily it's called striking nav for hedge funds it's what

they do with Equity Holdings and it's a similar concept for crypto we have to Market to Market every day if you're a company like let's say go back to microstrategy or a Swiss equivalent of that where your your manufacturer but you hold Bitcoin in your treasury as you said or maybe you decide to buy and then side to buy services with it it is intangible asset accounting and it means you have to go through a formal process of testing to see if it's impaired and you do that on a regular basis and and you need you usually need tools to help you do that and you you mark it down and you can only Mark if it if it recovers

under under IFRS you can only mark it up to the original cost whereas if your investment company if if Bitcoin goes way back up above what you paid for it you get that new value showing on your financials on your balance sheet um but if you're a different kind of company let's say like like a software company or automotive company like Tesla holding it you you are and you're using IFRS you can recover it but but it's with a capped at the original price so it's two very different financial reporting results depending on what kind of company you are and and that is a complaint that many people have about

the current state of accounting rules is that you get completely different results just based on the kind of company that you are and and in the US they're trying to change that in the International Accounting standard State they aren't looking to change that yet I think they're going to watch and see how that works in the U.S um is there a way to to make some accounting Arbitrage some regulatory Arbitrage and you know go towards a jurisdiction where it would be easier where you know yeah is there like a most favorable niche in regard to I know tax and accounting I I do think there is regulatory Arbitrage and that's going to have continue that's happening now

whether it's accounting or tax approaches the one thing I would would note though about that is that especially with tax there is tax Arbitrage that goes on even outside of crypto right companies structure they're many times structured transactions structure approaches using entities you know in in tax favorable places or using test tax structures and other in other places other than where the company is domiciled and so tax Arbitrage is is a thing that happens regardless of crypto so so I always like to point that out that companies do that

now and as long as you're doing it within the within the regulations there is there that can be a good thing and an okay thing to do as long as you're not avoiding or evading taxes when I was a tax Professor I would teach you know there's a difference between evading Texas and breaking the law and structuring things in a way that is the most beneficial for you as an individual or as a company maybe if I could you have something to add up how can I how can I maybe I'm sure that for example I'm in a I have a current business model with regard to you know blockchain Technologies as of now I want to make sure

with the tax authorities that in one year one year time my situation will be considered in a certain way is there some some method to to ensure that uh uh the tax authorities uh can you defend you know that for example uh the 10 Bitcoin that sits in my accounting will be considered as you know investment under Swiss law is there some yeah to request some uh some ruling the authorities well when it comes to the commercial accounting uh well I won't go into details because it's not my my field from a tax perspective as well um at least you uh

the the the the cryptocurrencies uh in the in the balance sheet will be recorded at their you know acquisition uh value and usually there is a Susan just tell me if I'm if I'm getting something wrong but uh you cannot uh I mean it's a maximum it's like a maximum and you can only do some amortization so the depreciation I'm not sure if the the word is correct uh in in English but uh it's the only it can only go uh lower and not uh higher it's only uh in the hypothesis of uh for sale uh that's a benefit uh you know corresponding uh to

the difference between the book value and to the fair market value uh will be taking into into consideration for so when it comes to commercial companies I'm not sure that there is a need for for companies to go and seek for a ruling you know for of the tax authorities when it comes to individuals it's different because of course every year um I am not talking about the income tax but about the wealth tax because there is no income as you said before is Susan if there is no tax event if there is no realization but uh when it comes to the the wealth tax at the end of the year uh

you will have to declare it at a certain value as I said before there is an official list on the website of the the tax administration but there are other ways to to come to the I mean to declare to report this uh this value and uh well the the rates the tax rates uh for welfare tax is not high Switzerland is about well Geneva is like the highest one is around one percent uh but let's say that well it's one percent out to you know five 500k or or more it can be yes significance and there is maybe a way um to have a discussion a discussion with tax authorities beforehand uh in order to try to you know limits and to

declare uh but this is something I'm really not sure of and to try to declare uh those those cryptocurrencies as uh commercial uh commercial um wealth uh which is something uh feasible for shares but it's not I'm not sure it's for it's visible for for tokens so this is maybe a way and it also should be noted that for shares when it comes to you know regular shares of companies and when you declare those shares into the commercial wealth when you try to do it the the tax administration will here again see if

you got into debts or not uh to to buy the shares and here if you want to declare them as a commercial wealth the tax administration will ask for that if there is no debt then there you cannot declare them as a commercial wealth but they have to be kept in the private wealth and private wealth is submitted to the to the rules I just said before so fair market value so sure please Susan one of the things that I just was telling me to also draw out for folks is that you know there is the tax approach each year if you know

if you're a commercial entity or or um and then there's the the accounting rules approach and so so you know we see this a lot globally where the taxes you put it on your ballot your tax balance sheet at cost and you wait till you sell it and you get the selling price at that time and that Delta may be taxable depending on whether you meet the criteria or not or not but that's that for taxes it's often quite easy because it just stays fixed yeah I bought it at X and I sell it at Y and that Delta tells me you know sort of the gain or the loss and and and then there's you know potential um tax ramifications there for for the

accountancy side of the story both in the U.S and under the International Accounting rules you you have this fluctuation and how it fluctuates whether it can only fluctuate down Frederico mentioned or whether it can fluctuate up and down if this Mark to Market approach the accounting rules mean that your balance sheet for accounting will look different than your balance sheet for tax I have most almost all of the time and so that is why it can be helpful to have a tool as well there to help keep track of that if you will we have kind of a question that goes in exactly in the way we were speaking uh someone asked what are the tax benefit of holding a Bitcoin future

contract meaning so basically a Securities in its accounting versus only directly Bitcoin would it be would it be very different so it will be two different tax reports as I understand and uh would it be one would be better than the other from of course we have to to to to to so the first uh preamble to this question is that we we know you know which law would be applicable imagine can you give me like a one minute answer and because there are like tons of interesting questions so like uh to give you a chance so basically uh would it be very different what would you recommend and do you have like a

significant tax advantage uh in uh having uh a Bitcoin future contract meaning a Securities or Bitcoin directly on your accounting I I will give a short a short answer and I'm not not sure about my answer but the valuation uh method is not the same um when it comes for uh when it comes to I mean when we're talking about a token from one side and uh when we are assessing uh the value of shares uh and you have maybe a little more of a control

on the valuation of the shares of a company uh but in Switzerland uh you know the method which is used by The Tax Administration in order to evaluate uh the the shares you're holding in a company which is uh you know well a private company is not uh I mean it's not really appreciated by by the public so there are two different methods but you know without uh you know a concrete case it's kind of hard to say what method will be better in in each case but this is you know I'm not really sure about my answer I'm sorry may I please

Suzanne maybe do you have a one minute time because I want maybe to add up to this sure I mean mine would be more on the accountancy side of things that it is the there is real differences in the the accounting treatment so if for instance I'll go back to my microstrategy or Tesla example just because that helps people can really see like that's a car manufacturer that's holding Bitcoin and if they decide to and it's just intangible asset whose value can only go down and never come back up in terms of how it looks on their balance sheet until they sell it if they held a Futures Contract that goes so if it's Bitcoin Futures they get to go with the market so so it can go down but it can

also come back up and so so that ends up being potentially attractive for companies that are thinking about how it appears on their balance sheets so and that they can recover if things go back up if it's a Futures derivatives contract you get derivatives accountant counting treatments if it's a Futures you know contract and you don't otherwise so um one of the interesting point that someone mentioned to me once is that if you buy imagine you buy a Bitcoin at one thousand uh one thousand dollars then the Bitcoin you know goes towards like 20K imagine if you you counted your Bitcoin and 1K uh you will know during the year because you had a huge

filtration and you bought for a 0.3 uh worth of bitcoin uh let's say 0.5 uh and you were you bought you bought a service for 10K your Bitcoin is still value at 1K meaning it's a value at 500 Swiss franc imagine but still you acquired like something worth 10K and from an accountable tax point of view you have like some kind of a balance that uh and it might work in your favor depending on whether you're an individual or whether you're you're a and um we had like Carmen asking this question um when it's worth it to open a company and and uh Federico you already kind of

answered this question but maybe can you give maybe an idea of when do you think it's it would be worth it opening a company versus being like some kind of a individual individual Trader is there like some kind of a threshold some kind of a that you could I I know it's hard yeah no definitely definitely no no thresholds uh I mean it it won't be a good answer to say that there is a threshold uh but for me what's important is maybe what you what you're what are you doing with this company uh I mean do you have some uh control uh or is it just a holding company or something like that or is it uh you know a commercial company with some concrete activity uh yeah and then

when it comes to companies you have a lot more questions that will arise you know I don't know where Carmen is located for instance if she's abroad or not but you have uh you know some other taxes to take into account for instance the withholding tax and well the withholding tax is not something uh that is really you know uh appreciated once again by the public and there is not much you can do against this withholding tax when you're located abroad you know it's 35 percent of of tax and then you have to rely on a double taxation treaty and to make sure that you know this double taxation treaty

has a rule which is which would be in your favor in this process case meaning that for instance Switzerland can tax more than let's say 10 or something like this but it's still 10 and if you hold directly or if an individual holds directly crypto currencies abroad maybe that you know this tax disadvantage uh won't uh won't uh apply won't come won't apply yes thank you but that's that's also one of the key points that people tend to to disregard you know the regulation Etc but knowing the rules helps you actually make money by the end of the day because you can be more

efficient and because you can also optimize everything I'll uh I'll uh switch towards the other question because there are there we have tons of questions here um so one of the questions that retained my my attention is is Jack's question with regard to he was wondering it's kind of an open question and I would like to to ask it to Susan uh do you think technology is some kind of a revolution of the accounting industry we have this triple entry accounting we all part of it credit debit trust do you think do you think it will revolutionize because in the end the authority still wants to have the tax reporting being handled normally you know credit debits so what do you think

it's a wonderful question and I just I do hold out hope that the account the accounting side will evolve to that and you know I I this is just my personal opinion I'd love to see it move forward and I'd love to see it get revolutionized by the the technology that's now available and more and more so um I see again just my personal opinion one of the things that I since I've been a professor I've you know had had the chance to explain to students is that you know taxes really often serve very different purposes in the accounting and

so governments use them to raise money for their for the government's treasury to up you know offer good you know services to all of us and to operate the government but often there's they're used to reward or penalize individual Behavior or corporate Behavior so when you think about something like research and development tax credit that may be available in certain countries or certain parts of countries it is to reward to encourage Innovation or spending on R D in the states we're famous for taxing um Coca-Cola and sugary drinks because we're trying to you know somebody somewhere decided that would be a way to get people to you know stop drinking too

much sugary drinks and so taxes have this whole separate kind of purpose in a society and the recording of them I think is often driven by that and I suspect they may be slower to evolve for that reason but that's just my my opinion and I'm not sure um if if Frederica agrees with me or not and then or you do so finally uh Federico said I do a question that I would like to discuss with you guys so it's more uh for federal code is one as an individual who has invested 20 30k in 2020 uh with no

significance activities since how do I report for tax in Switzerland for 2022. so basically someone has invested eventually has made a benefit what if he has made a benefit what if he didn't get the benefit and basically where do they where does he get the the rules that explains it all it's kind of basic questions so yeah the tax rule view is basically the law yeah do you want to give like a few a few highlights on this uh on those questions so yes uh so so uh depends of course of uh uh where man what what um what happened uh with the the first

investment you know made in in 2020 to 2021 uh if uh the investment uh has been uh sold uh well and the person got uh cash uh well the cash which then is uh is a wired into a bank account uh must be simply uh declared um as well in the tax declaration so it's nothing and if there is uh if the this person is still holding uh the the cryptocurrencies uh that were bought two years ago uh well the rule that I I told

before will apply here so um it is necessary to go to the the federal tax administration web sites to check whether the cryptocurrency is or not on the list if it's on the list well it's a simple you know calculation that you have to do and you report it into you know you declare it the Swiss franc value and if it does not appear in this list then simply go through a platform and make the change yourself and that's that's it I think so you have to declare on your in your personal uh declaration in your personal yes or yes

I had 10 Bitcoin I sold them and it might eventually fall in this exception that we discussed prior to to that So eventually yeah this is the capital gain but in the absence of capital gain and if this person still holds uh cryptocurrencies in uh in his crypto wallet then he has to declare it in the special I mean there is no at least in Geneva and in other neighbor captains there is no specific place to mention uh the cryptocurrencies uh there are two main Trends uh some contents say that you have to declare it

exactly the same way you would do for a bank account so you have to click on the banking account bark and you declare the value at Swiss Francs and the other possibility is to well it's kind of the in the same part of the tax declaration you have to declare your cryptocurrencies in the in the share uh part so it's like you have shares in in a random company well instead of the game of shares you'll declare the the cryptocurrencies you have and I have no preference for one or four the other the big difference is that when it comes to to sharing shares you can also

um insert uh the the gains and losses that you have done during the year which is something you cannot do for banking accounts for bank accounts you can only uh state that the the value at uh December 31st we have eight more minutes and I would like to to ask you two more questions that uh found are interesting one from Martin patronk he's an nft artist selling nft against if and he is asking what will be the the his tax situation I believe it's also interesting to to to note here and to open the discussion towards uh the vat

so because we mostly discount discuss income tax bid for company or for all for individual but just bear in mind that there are like other potential tags that may apply so it depends on the applicable law it depends on the qualification of the token and uh it depends also eventually on on potential exception uh so what would you say to an nft artist selling nfts against it what is in a few words the tax situation is would it be worth it you know staying as an artist opening in what we call the uh in individual basically a type of company where you you you're it's a personal

what type of operation where you don't create a new legal entity is it worth it or what should the person in those situation do I don't know excuse and if you want to ask answer first then I yeah I could I I feel like I have you know it's one of the things where you you have questions to ask and you know sort of you know I saw throw out some questions that maybe kind of might help um is you know in in some parts of the world they think about whether what you're doing is truly a business and and so I guess you're asking a question Gabriel should you open a business or um and or a hobby and and you get different tax treatments depending on

that and then sort of what is it that you're in quote selling and and with nfts you know one of the things many of us have really seen and learned is that are you selling outright the ownership of this whole piece of tokenized art and that becomes that other person's forever to use how they'd like to dispose of how they'd like and if they want to sell it on or are you essentially doing a licensing arrangement where they get to use it to display it but but it's the whole a whole art is not there it's just an aspect of it displaying it or they get to license it for a period of time and so some of those questions come to mind

and I don't know if that helps sort of tee things up and hand it back to you Frederico a little bit that I sort of had questions that I wondered about should I add the vat for just a simple question should I should I add VT whenever yeah should I add like a 7.7 percent normally well if you consider nft as a work an electronic worker of Arts uh it should be out of the scope of the vat act in Switzerland so that the at shouldn't be due but this is typically something uh especially for an artist

which I imagine uh is a creating generating nfts all day long it's something that should be you know just answered by a federal tax administration responsibility it could be a tax ruling which is really comfortable because the tax ruling for uh the the taxpayer is binding for uh you know the tax administration so that when they give you the permission um well not the permission but when they validate um a tax transaction you know that they cannot go or they shouldn't go at least against their own advice given a couple of years before but you can also just

you know the take your phone and they're really uh they're really uh you know quick at the federal tax level uh you can ask just a question and if they have you know a direct answer then you can you can rely on this answer it's not binding so it's much less comfortable but at least you don't have to hire for a lawyer to get the answer it's not of course what I would recommend because first of all it's against my own interest but of course of course well in some think that you've done both both ways yeah but it's important to see the problem ahead and again you know I believe that's what my lights you know you look it up you just make sure that for example with a with a tax lawyer you

just take one or two hour just to figure out if there's like some potential problem with your use case and eventually you try to solve it ahead because you know crypto it's a gray area so you have to make sure that you do think properly otherwise you might have done the problems being with the accounting or with the tax authorities starts reading asking the questions especially in Switzerland we are have a competent authorities I believe that are able to answer and upon which you can rely you wanted to edit something more Suzanne fidelco otherwise I'll I'll have you know remind me to ask the last question which is a complicated one before we we just wrap up this event so basically we have Manuel Stahl he has

a complicated question they're creating a DIY Association in eastern Stein uh the dial Will issue tokens for the the token of the ecosystem the question of manual is how those uh those tokens once they are sold so the association will sell uh tokens against usdt uh how do this uh those usdt will be considered from that accounting point of view and um and uh so just do this token need to be recognized on the the balance sheet if so how long term does that Equity adaptics before you answer I would just like to to to say that nothing of course

in this session is the personal advice I think it's interesting that we have some personal use case uh one of the the point also that is interesting here is that I believe you should be very careful so it's an association another time so we don't have any person really competent on the relationship at all knowing that uh also having an association are necessarily not for profit so I'm not even sure that depending on what exactly what you want to do your model is valid from the beginning knowing that uh let's only focus on the accounting and tax point of you sell tokens with your vehicle you have a 100K token you sell it again usdt

how is this considered from an accounting and tax point of view on the accounting side there's there's a few few things to think about if you you know sort of these kind of follow-up sort of questions and it is what what com what rights or not come with the token and that really will put you on a Continuum within the accounting rules at least where you end up if it's almost like Equity rights you know so that it becomes literally almost a you know sort of almost like share ownership in a sense so it's almost like Equity right now most of the accounting rules consensus and there's a there's a lot of

thinking going on still around some around doubts in particular and what sort of rapper they're in and are they in a rapper are they a not-for-profit are they wrapped in a in a limited liability company or some other sort of formal structure that ends up also being part of the story but but is what what's what what's Co what do you what is the person who or entity that buys joking what did they get in exchange and so often you will end up in a financial instrument sort of accounting so perhaps ifrs9 if you're if you're in the IFRS world in the US you can end up in you know it's I think it's 305 and try to remember which part of the code but you end up sort of with a

financial instrument of some sort rather than that thing called the intangible asset so so that's that's that thing a lot of people really like to avoid being on the balance sheet the usdt again can right now is looking like so some some stable coins are allowed to be treated as a financial asset or financial instrument if they're truly pegged to something where you're guaranteed one for one Fiat back and it's a contractual true you know not just an algorithmic pegging to some mixture basket of things but you literally will get Fiat one to one you can end up with it showing in as

a financial asset on the balance sheet that otherwise if it's a different stable coin that maybe is more algorithmic it still becomes this intangible asset that has to be impaired I'm sorry I'll pause there is really cool well uh as you told them before Gabriel uh I am not a specialist in the you know Lichtenstein tax law but if I try to assess the the case uh from a Swiss uh tax law point of view uh well the question is kind of hard to answer because uh I thought it was the first uh question that we're going to be asked today is how finally the eventually the

the cryptocurrencies are treated in this country and the first thing you have to do as Susan said before is that you have to classify the tokens uh and you have to uh uh you know use the classification the official classification of the federal tax administration it's a utility token yes so if it's utility token you know I have a a table here with like 40 different boxes uh and every box is for you know every you know for every crypto for every token you can have so uh you said you said utility tokens

yeah imagine it's a utility token it is in a utility token yeah so it will be definitely a benefit uh for uh for the company issuing the the token but if it uh was for instance uh what they compare to bonds so um foreign Capital tokens uh it won't be considered as a benefit as a profit for the company so that's no income tax yeah it's a it's an association right but Association associations in Switzerland pay taxes on profits unless they are tax exempts which is another uh issue and is not really applicable in the field of the cryptocurrencies but

even even though it could uh it could be uh it could be you know possible so I I believe you know uh so in the question the the manual was was asking whether we could consider you know the the 100K of its the 100 000 token he selled against a hundred thousand US Dollars uh whether it would be considered as Equity so no because they would Association they don't have Equity it's really not how it works really a confusion between Association and Dell because and the Dow is is it could be an an entity legal entity in itself and we have a very interesting use case happening in the US I believe Susan you know all about it about this

uh this DIY Association basically that was uh ping by the crcc which will probably create a precedence so we have to bear in mind that uh you know it's why that's why you really need to have also specialists at hand to discuss you know whether you create like a right the right legal vehicle knowing that they are decision are actually two different things in this use case what I believe it's also interesting is as you mentioned if you have a utility token and the association is selling a hundred thousand utility token you might be in the same situation as a situation that we're selling a good simply that this good is actually

so totally you have to add the vat you have to you know take that into account and as you fairly recall you were rightfully mentioning uh probably it's an income of course not a legal advice otherwise you know guys uh we we discussed uh tons of also other interesting stuff during our Preamble I believe it would be it would be interesting to have maybe uh in the future another session Susanna also proposed like a very interesting question that I wanted to to discuss but uh unfortunately or fortunately for us we had so many questions from the public from you guys so I'm very happy that we had this awesome public that that joined

us this evening um you're feel free also to reach out to the speakers uh I would just like to to thank them uh a lot for like their time their their know-how and taking also uh the the time to answer also all those questions and sharing it uh with us tonight of course I would like to to uh to uh to also thank our awesome Nicki Chinese for organizing the events taking care of everything and without further Ado uh I would love to to to say a good evening to all of you and uh we'll see each other around uh probably next uh next fiscal year next tax year great [Music]

thanks so much thanks a lot thanks so much thanks a lot goodbye hi everyone thank you bye-bye