23 May 2025

Change in VAT practice: FTA reaffirms support for crypto

  • Articles
  • Tax
  • Blockchain / Digital Assets
  • Taxes / Duties

In a change of practice, the Federal Tax Administration recognizes the entrepreneurial nature of foundations and associations in the crypto sector for VAT purposes. This strengthens the position of such organizations and creates legal certainty.

  • Fredrik Dekker

    Tax Advisor

  • Thomas Linder

    Tax Partner

1. Change of Practice

In a recent statement, the FTA, after a detailed examination of the special circumstances of foundations and associations in the crypto industry that promote and develop open source software in accordance with their purpose, concludes that they do not pursue an idealistic purpose, even if they are non-profit organizations according to their statutes.

2. Enterpreneurial Activity

However, it is still a prerequisite for VAT liability and must be checked whether such associations and foundations operate a business within the meaning of Art. 10 para. 1bis of the VAT Act. Thereby, the development and promotion of the open source software and the generation of income from services in connection with this technology (in particular income from validation, delegation, licensing, blockchain-based dApps, consulting, events and sponsoring in connection with this blockchain technology) must be treated as a single unit with regard to the assessment of entrepreneurial activity. A separation for the existence of an independent non-entrepreneurial area cannot be made sufficiently clear according to the FTA's new practice definition.

In addition, the fact that the income from services may only be generated if the protocol has been successfully developed or if it must have reached a certain level of distribution according to the planning does not prevent the commencement of entrepreneurial activity (cf. on start-up companies VAT Info 09 para. 1.4.1).

Insofar as the association or foundation intends to provide supplies in return for consideration on the basis of the development and promotion of the protocol and after completion of the developments and launch of the so-called "mainnet", the promotion and development of the protocol is therefore (also) aimed at the sustainable generation of income from supplies. This applies even if there is no intention to make a profit and irrespective of the amounts received that do not qualify as consideration (e.g., from the sale of payment tokens).

3. Input Tax Deduction

Consequently, there is no restriction on input tax deduction due to a non-business area (see VAT Info 09 para. 1.4.2.4).

Therefore, foundations and associations in the crypto sector are entitled to an input tax deduction within the scope of their business activities, subject to Art. 29 and 33 of the VAT Act and within the scope of the other provisions of the VAT Act.

4. Conclusion

This change in practice reflects a deep understanding of how decentralized protocols and networks are built - and sends a clear message from the authorities to support the Web3 industry in Switzerland with a pragmatic application of the law.

Many thanks to all involved stakeholders from the Swiss crypto ecosystem and the FTA for working closely together to find such a forward-looking, Web3-friendly solution!

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Is your organization also affected by this change and do you have respective questions - or do need any other support? We are at your disposal and look forward to hearing from you.

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