Temptation to Tax Crypto Income Works in Favor of Bitcoin Wages
Switzerland has already established itself as a crypto-friendly nation and it is a role model in many respects, including the way it treats cryptocurrency remuneration. Many leading companies and projects in the crypto space have already set up offices or are headquartered in the Swiss Crypto Valley, centered in the Canton of Zug. The long list includes names such as Shapeshift, Xapo, Bitmain, the Ethereum Foundation and most recently the Libra Association.
For many decades, the Alpine federation was a good example of geopolitical neutrality and financial privacy. The latter has been somewhat degraded in the past few years under pressure from powerful players such as the U.S. and the EU. However, decentralized digital currencies are offering Switzerland a chance to redeem itself in the eyes of account holders, and the country has embraced the opportunity.
Many aspects of dealing with crypto assets have been regulated already by the Swiss authorities and that includes taxation. People who receive cryptocurrency as wage income need to declare it and pay tax, just like with fiat salaries. Crypto gains of investors and traders are treated as tax-exempt capital gains but depending on the canton, you may have to pay wealth tax which is levied on the total amount of digital coins you hold, similar to cash or precious metals.
In a confederation like Switzerland, there are multiple levels of income taxation – federal, cantonal, and municipal. Regulations vary from one administrative unit to another and income tax can be progressive or proportional. Amounts owed also depend on the marital status of the taxpayer. The scope of taxable income covers all funds accruing to a natural person from all sources. That includes remuneration received in various forms, including digital.
Cryptocurrency Remuneration Spreads in Friendly Jurisdictions
Switzerland is undoubtedly a leader in creating favorable conditions for crypto businesses, but other nations have been quickly catching up. Among those where crypto salaries are a working option are Japan, Estonia, and the United States. For example, Japanese internet giant GMO announced some time ago that its almost 5,000 employees will be able to receive part of their salaries in cryptocurrency. And this spring, U.S.-based cryptocurrency exchange Kraken revealed it paid 250 salaries in bitcoin in April.
Crypto companies registered in Estonia, considered to be one of the most advanced digital societies, are often partially compensating or encouraging their employees with cryptocurrencies and tokens. The Baltic nation’s legislation provides for the taxation of such income. But even in jurisdictions where cryptocurrencies are yet to be legalized, crypto salaries are possible. In Russia, for example, half of fintech companies pay their employees with coins.
The crypto industry is not restricted by national boundaries. Cryptocurrencies significantly improve the speed and reliability of cross-border payments and the growing gig economy is taking advantage of the benefits of frictionless digital money. According to a study from 2017, freelancers will form a majority of the workforce in the United States within a decade. And a survey on payment preferences conducted in 2018 shows that a third of them would like to be paid partially or entirely in cryptocurrency.
Crypto-paid remote jobs are rapidly spreading in the global economy as well, thanks to the services offered by companies like Bitwage. It’s also getting easier to find a jobpaid in cryptocurrency with the help of platforms such as Workingforbitcoins.