Over the past few years, various regions around the world have made it known that their intent is to become a hub for blockchain. While a few have managed to cultivate a reputation associated with the technology, it is arguably Zug, Switzerland, that is leading the way. As a result, the moniker ‘crypto valley’ is often used when referring to the region.
Zug continues to bolster this reputation; it has announced that commencing in 2021 the region will begin accepting Bitcoin and Ether as payment for taxes. To use this service, all taxpayers need to do is request a personalized QR code from the Zug Department of Finance for payment.
“As the home of the Crypto Valley, it is important to us to further promote and simplify the use of crypto currencies in everyday life…By enabling the payment of taxes with Bitcoin or Ether, we are taking a big step in this direction.” – Finance Director Heinz Tännler
Using Crypto for Taxes
Along with the decision to accept BTC and ETH as payment for taxes, comes various stipulations. They are as follows,
- Service commences in 2021
- Only Bitcoin (BTC) and Ethereum (ETH) will be accepted
- Payments must be paid in full
- Eligible for tax balances up to CHF 100,000
As the region gears up for this change in 2021, there will be a short pilot program taking place in the coming weeks.
Despite being known as crypto valley, Zug (like most regions) would not necessarily have the technological wherewithal to develop a solution for collecting cryptocurrencies as tax payments. As such, a partnership was struck with the popular broker, Bitcoin Suisse.
In this partnership, a multi-step process is needed to make crypto tax payments possible.
- Bitcoin Suisse collects cryptocurrency tax payments from citizens
- Bitcoin Suisse immediately converts the cryptocurrency to FIAT (Swiss Francs)
- FIAT transferred to the Zug’s Cantonal Tax Office
Naturally, as these are blockchain based transactions, proof of payment and account settlements will presumably be quick and transparent.
A question asked by many is, “how will the government escape the volatility associated with cryptocurrencies when accepting them as payment?” By structuring the payment system in this manner, the Zug Department of Finance is able to avoid this volatility, as funds are immediately converted to FIAT.
“We do not take any risk with this new payment method, as we always receive the amount in Swiss Francs, even if payment is made in Bitcoin or Ether” – Finance Director Heinz Tännler
While Zug accepting cryptocurrencies as a means of payment for taxes is positive news, the region is by no means the first to announce such a step. In fact, it is now the third region in Switzerland to make the decision, with the most recent being the municipality of Zermatt. Notably, it was also Bitcoin Suisse that made the decision possible in each instance.
Outside of Switzerland, there have also been various examples in Canada. As a country that has continually led the way in the growth of blockchain, this is no surprise. From the creation of Ethereum to the launch of the first Bitcoin funds, Canada has remained at the forefront of the industry. These instances in Canada have taken place in Richmond Hill and Innisfil.
The point of all these examples is a simple one – acceptance and adoption of cryptocurrencies is occurring. Although acceptance for tax payments is a great sign, adoption of cryptocurrencies is evident in a variety of ways.
- Auctioning off (viewed as assets of value) – Seized BTC regularly auctioned off by government bodies. In doing so, BTC is given credibility as an asset viewed as valuable by the government itself.
- Regulations – Regulatory bodies have recognized the staying power of digital assets, and have begun to amend and clarify regulations to better suite a future in which they play a role.
- Institutional offerings – Bitcoin Funds, Futures markets, etc.
Playing home to many blockchain oriented companies, Zug is a region in Switzerland, commonly referred to as ‘crypto valley’. It has earned this moniker due to crypto friendly laws and regulations. The region is a relatively small one, hosting a population of roughly 127,000.