INTERNATIONAL EXCHANGE OF INFORMATION FOR CRYPTOASSETS

In fall 2022, the OECD presented an automatic exchange of information ("AEOI") specifically for digital assets, the so-called Crypto Asset Reporting Framework ("CARF"). In November 2023, around 50 countries, including Switzerland, agreed to extend the AEOI to digital assets and the CARF. The CARF is intended to close existing gaps in the tax transparency regime and eliminate the different treatment of "traditional" financial products and crypto products. It is planned to enact the crypto AEOI on January 1, 2026, so that the first data exchange on the basis of the CARF can take place in 2027. To this end, the international legal basis must first be approved by Parliament and the existing Federal Act and the AEOI must be amended accordingly. At the same time, various recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes regarding the already existing AEOI will also be implemented. In this regard, the Federal Council opened the consultation process on 15 May 2024 (see here).

The AEOI for cryptocurrencies follows the same system as the AEOI for financial accounts. It provides for the automatic and regular exchange of information on transactions involving cryptocurrencies. The information to be exchanged is to be collected by the providers of crypto services subject to the reporting obligation and transmitted to the Swiss Federal Tax Administration (“SFTA”) once a year. The information to be exchanged and the qualification as a reportable provider of crypto services are regulated as follows in the multilateral agreement on the crypto AEOI and in the DTA.

Who: Legal entities and natural persons are subject to the CARF reporting obligations, if they provide services for or on behalf of their customers in the form of exchange transactions between various relevant cryptocurrencies and between relevant cryptocurrencies and fiat currencies. As such services also qualify the providing trading platforms or by assuming the role of a counterparty or an intermediary in the aforementioned exchange transactions.

About whom: Reportable users within the meaning of the CARF are natural persons and legal entities (including trusts and foundations) that are clients of a reportable provider of crypto services and are not exempt from the reporting obligation. The beneficial owners of the cryptocurrencies in question are also deemed to be reportable clients. The purpose of recording the beneficial owners is to prevent circumvention of the AEOI.

What: The reports must generally contain information on the identity of the person subject to the reporting obligation (name, address, date of birth, tax residency, tax identification number, etc.) and on the transactions carried out (type of cryptoasset, total gross amount, total number of units, number of transactions, staking and lending fees etc.). The information on the provider of the crypto services concerned subject to the reporting obligation must also be provided.

How: In order to identify the reportable users of cryptocurrencies, determine the countries relevant for tax reporting and obtain the necessary information, the CARF contains diligence obligations for the reportable providers of crypto services. The intentional breach of these diligence obligations and other obligations under the AEOI can be punished with fines of up to CHF 250,000. In the event of negligence, the fine is up to CHF 100,000.

Potentially reportable providers of crypto services are recommended to check as early as possible whether they or their services fall within the scope of the Crypto AEOI and - if a reporting obligation exists - to implement appropriate processes to ensure reporting.

INTERNATIONAL AUTOMATIC EXCHANGE OF SALARX DATA 

On June 7, 2024, the Federal Council opened the consultation on a new federal law on the automatic exchange of salary data (see here). The draft of this law is based on the agreements that Switzerland was able to conclude with Italy and France to create new rules for the taxation of cross-border commuters (Italy) and the taxation of teleworking (France).

On 23 December 2020, Switzerland was able to conclude a new "cross-border commuter agreement" with Italy. This agreement entered into force on July 17, 2023 and has been applicable since January 1, 2024. In addition to the redefinition of the term "cross-border commuter" and the new allocation rules for taxable income, the agreement provides for the automatic exchange of information on salary data under the title of "Administrative cooperation". According to the new cross-border commuter agreement, persons are deemed to be cross-border commuters if they

• are resident for tax purposes in a municipality whose territory lies wholly or partly within a 20 km border zone of the other contracting state,
• are gainfully employed in the border area of the other contracting state for an employer based there or for a permanent establishment or fixed base located there and
• return to their tax domicile in their country of residence on a daily basis.

Under the new agreement, “new” cross-border commuters who are resident in the Italian border region and are gainfully employed by an employer based in the Swiss border region or have a corresponding permanent establishment will be subject to ordinary taxation in Italy. However, Switzerland may tax the income at 80% of the withholding tax, whereby Italy credits this tax to avoid double taxation. Existing cross-border commuters, i.e. those who already qualified as cross-border commuters between December 31, 2018 and July 17, 2023 and are still considered cross-border commuters under the new agreement, will continue to be taxed exclusively in Switzerland. The cantons of Grisons, Ticino and Valais are obliged to pay 40% of this tax revenue to the Italian border communes until December 31, 2033.

In order to ensure the correct taxation of new cross-border commuters, the cross-border commuter agreement provides for the automatic exchange of salary data. For employers in the cantons of Grisons, Ticino and Valais, this means that they must report salary data and other information on the person concerned for all cross-border commuters resident in Italy to the cantonal tax authorities for the first time at the beginning of 2025 for the 2024 calendar year. The tax authorities of the cantons of Grisons, Ticino and Valais will then be responsible for forwarding the information.

In relation to France a supplementary agreement to the existing double taxation agreement was concluded on June 27, 2023, which was adopted by Parliament on June 14, 2024 (see hier). With this supplementary agreement, the tax attribution standards for teleworking previously regulated in various mutual agreements will be transferred to the DTA and the protocol to it. The new regulation stipulates that 40% of the working time per calendar year can be performed in the form of teleworking without the employee's country of residence having the right to tax the wages paid. This regulation applies to the whole of Switzerland, with the exception of cross-border commuters who work in the cantons of Basel-Landschaft, Basel-Stadt, Bern, Jura, Neuchâtel, Solothurn, Vaud and Valais. Although the same tolerance of 40% applies to them, they are technically not covered by the DTA.

The employer's state pays the other state compensation amounting to 40% of the tax owed for work performed in the form of teleworking. However, a special rule applies to employers in the canton of Geneva: Here an exemption limit of 15% of the working days for which no compensation payment has been established. In other words, a compensatory payment is only due for teleworking days that account for between 15% and 40% of working time. This provision was included in the agreement since Geneva must continue to pay the departments of Ain and Haute-Sovoie a compensation payment amounting to 3.5% of the gross salary of cross-border workers employed in Geneva. France did not want to waive this payment for domestic political reasons.

It is obvious that monitoring compliance with the aforementioned regulations requires detailed and reliable information on the activities and remuneration of the persons concerned. France has therefore expressed the wish for many years to compare the salary amounts reported by Switzerland with the income declared in France by cross-border commuters. With the supplementary agreement of June 27, 2024, an automatic exchange of information for salary data has now been included. In addition to the personal details of the persons concerned, the following information must be transmitted: Calendar year in which the income was earned; number of teleworking days or teleworking rate in percent; total amount of gross remuneration paid. The introduction of the exchange of information is planned for the beginning of 2026, which means that employers in all Swiss cantons will have to submit information to the competent tax authorities for the first time at the beginning of 2026 for the calendar year 2025 for all employees residing in France. In contrast to the exchange of information with Italy, salary data will be reported to France via the SFTA.

As the international automatic exchange of salary data is being introduced for the first time, the Federal Council intends to create the necessary legal basis for this in a new federal law, the Federal Act on the International Automatic Exchange of Information on Salary Data. In addition to the procedure, responsibilities and confidentiality obligations, the new law also covers the rights of employees. In particular, they have a right to information about the information concerning them and to be transmitted, as well as the rights arising from the Data Protection Act. Finally, the penal provisions should also be emphasized for employers. Negligent or intentional violation of the obligation to provide information that must be reported and violation of the obligation to provide information to employees can be penalized with a fine of up to CHF 1,000. In serious cases or in the event of recidivism, the fine can be set at up to CHF 10,000.

CONCLUSION

As shown above, the expansion of the international automatic exchange of information to include crypto and salary data also entails corresponding obligations for information holders, i.e. crypto service providers and employers. It is advisable - not least with regard to the criminal provisions - to check at an early stage whether and to what extent the described extensions are relevant for your own company and, if necessary, to set up appropriate processes to ensure the timely and correct provision of the data to be transmitted. It remains to be seen whether and when the automatic exchange of wage data will also be introduced in relation to Germany and Austria.

VAT and Customs

We would like to take this opportunity to remind you that at the end of 2022, the Swiss people ap-proved an increase in VAT rates with effect from January 1, 2024. The background to the increase is the financing of the “AHV” (“Alters- und Hinterlassenenversicherung”, “Old-age and survivors' insur-ance”).

As a result, the following VAT rates will apply from January 1, 2024:

We would like to take this opportunity to remind you that at the end of 2022, the Swiss people ap-proved an increase in VAT rates with effect from January 1, 2024. The background to the increase is the financing of the “AHV” (“Alters- und Hinterlassenenversicherung”, “Old-age and survivors' insur-ance”) place of work principle, according to which the country of employment can tax income from employment if the work is actually physically performed in that country. If certain working days in cross-border employment relationships are no longer physically performed at the employer's registered office in the country of activity, but in the home office in the country of residence, this can lead to a different allocation of the right to tax salaries.

For the example of an an international weekly resident with residence and family domicile abroad and place of work in Switzerland, this means that Switzerland may tax the Swiss working days based on the place of work principle. However, each individual working day performed in the home office at the foreign place of residence is subject to tax abroad and must be exempt from tax in Switzerland accordingly. If the home office activity abroad reaches a certain level, it must be examined whether the foreign country of residence has the exclusive right to tax the employment income as a result of the application of the so-called "assembler's clause" in accordance with Art. 15 para. 2 of the respective DTA. This special provision applies if the employee spends a total of less than 183 calendar days in Switzerland (working days including weekends and holidays) and the remuneration is not paid by an employer in Switzerland or a permanent establishment of the foreign employer located there. If the conditions are met cumulatively, Switzerland loses its right of taxation as the place of work.

Another exception to taxation at the place of work can be found in the taxation of international weekly residentFor example, a new consultation agreement on the application of Art. 15 para. 4 DTA Germany was concluded with Germany on 6 April 2023. According to this agreement, the provisions of this article will also apply to "senior executives" with residence and family domicile abroad and place of work in Switzerland, this means that Switzerland may tax the Swiss working days based on the place of work principle. However, each individual working day performed in the home office at the foreign place of residence is subject to tax abroad and must be exempt from tax in Switzerland accordingly. If the home office activity abroad reaches a certain level, it must be examined whether the foreign country of residence has the exclusive right to tax the employment income as a result of the application of the so-called "assembler's clause" in accordance with Art. 15 para. 2 of the respective DTA. This special provision applies if the employee spends a total of less than 183 calendar days in Switzerland (working days including weekends and holidays) and the remuneration is not paid by an employer in Switzerland or a permanent establishment of the foreign employer located there. If the conditions are met cumulatively, Switzerland loses its right of taxation as the place of work.

So far New Standard rate 7.70% 8.10% Reduced rate 2.50% 2.60% Special rate for accommodation services 3.70% 3.80% of cross-border commuters. As in the area of social security, various special consultation agreements and regulations with countries bordering Switzerland had to be observed from a tax perspective due to the COVID-19 pandemic until recently. Although these have since ceased to apply, the increase in home office work as a result of the pandemic has provided an important impetus. Against this backdrop and the fact that employees increasingly want to work from their place of residence, various new regulations have recently been concluded with neighboring countries in the area of taxation of cross-border commuters.

Individual taxes in regards Direct Federal Tax There will be no significant changes to taxes for private individuals in 2024. Various deductions will be adjusted slightly upwards due to inflation:

Higher interest on arrears and remuneration Anyone who pays direct federal tax in advance will now receive a refund interest rate of 1.25% (2023: 0%). However, anyone who misses the payment deadline must now pay 4.75% interest on arrears (2023: 4%).

Introduction of equalization and compensation interest at cantonal and municipal tax level We would also like to draw your attention to the fact that certain cantons are reintroducing equaliza-tion interest as of 2024. For example, the canton of Zug is introducing equalization interest of 2%. In principle, this interest will apply to all outstanding amounts against the respective tax administration as at 1.1.2024. The right to establish deviating rules at the different cantonal levels is reserved. We therefore recommend that you contact your tax authority to clarify your situation with regard to any unpaid tax debts as at 1.1.2024. Both individuals and legal entities are affected by equalization interest. Due to the renewed introduction of equalization interest, the cantons will introduce compensatory interest as a counterpart.

Changes in the canton of Zurich Since 2016, the canton of Zurich has dropped a total of 13 places in terms of profit tax rates com-pared to other cantons. Current tax burden data shows that the canton of Zurich now has the highest ordinary profit and capital tax burdens in the country. In response to this, the Department of Finance has taken measures to make the canton more attractive again. The plan is to ease the burden on companies slightly, while shareholders will be asked to pay more. Specifically, a reduction in the sim-ple profit tax rate from 7 to 6 percent is planned. This would reduce the overall tax burden from 19.7% to 18.2% (direct federal tax, state and municipal taxes in the city of Zurich, calculated on pre-tax prof-it). In addition, the taxation of dividends from qualified participations is to be increased from 50% to 60%. Although these changes are planned, their implementation is not scheduled until 2025.

Until the outbreak of the COVID-19 pandemic resp. the lockdown on 11 March 2020, a workload of 25% of the total activity on average was considered to be a substantial activity. Thus, up to a maximum of 24.9% of the total activity could be performed in the home office without a change of insurance status.

Due to the special situation in connection with the coronavirus, a flexible application of the subordination regulations was agreed within the EU/EFTA and in relation to Switzerland, according to which the insurance subordination should not change due to the pandemic-related restrictions. Thus, a person is considered to be employed in the country of employment (and thus subject to the social security system there) even if he or she is physically unable to perform his or her work there and must perform 100% of the working days in the country of residence in the home office. In principle, an A1 certificate was not required in such circumstances. Within the EU/EFTA/CH-States this flexible regulation was extended until 30 June 2023.

According to the old regulation before the lockdown, in the case of a 100% workload, a home office activity of 2 days (40%) would lead to a change of social security status to the country of residence and the employer would subsequently be liable for social security contributions in the employee's country of residence and for the payment of the corresponding social security contributions. An A1 certificate confirming the applicable social security legislation would also have to be applied for. Under the flexible application regime during the COVID-19 pandemic, however, there would be no change in social security status despite performing more than 25% of substantial work in the country of residence and no need to apply for an A1 form would arise.

In order to continue a facilitation of social security subordination after 30 June 2023, Switzerland and certain EU and EFTA states have signed a multilateral agreement. The agreement provides that persons working in the state in which their employer's registered office is located may perform up to 50% cross-border telework (maximum 49.9% of working time) in the state of residence without the subordination for social insurance changing from the state of the employer's registered office to the state of residence.

In order for the agreement to apply to their employees, Swiss employers must apply for an A1 certificate (maximum validity 3 years, renewable) from their OASI compensation fund via the ALPS platform (Applicable Legislation Portal Switzerland). The same applies to foreign employers whose Swiss employees wish to work from their home office. They must apply for an A1 certificate from the competent foreign authority.

This exception is only applicable to situations involving two states that have signed the agreement. In the case of home office in a state that has not signed the multilateral framework agreement, or for an employer based in a state that has not acceded to the agreement, the ordinary rules and procedures applied before the pandemic will apply again as of 1 July 2023 (materiality threshold of 25% of the activity, need to apply for an A1 certificate). The agreement is also not applicable if, in addition to teleworking in the country of residence, the employee carries out other activities there, such as visiting customers, or has an employment relationship in another EU/EFTA state.

It should be noted that the above regulations only apply to the area of social security. The tax perspective must be examined separately and based on the respective applicable double taxation agreements, the supplementary agreements or memorandums of understanding, as well as the separate cantonal special agreements with the border states. A more in-depth discussion of the tax approach will be addressed in the next blog post. It should already be mentioned that a new mutual agreement has entered into force with France on 1 January 2023. A new cross-border commuter agreement and an amendment protocol also entered into force with Italy on 17 July 2023. In relation to Germany, the new consultation agreement of 6 April 2023 concerning "senior employees" must be taken into account.