Opening a Company to Invest Professionally

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  • BenutzernameMoneyland User Questions
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Good day,

First of all, thank you for your articles.

I am wondering whether it is possible to professionally manage my own assets on a professional level. Could an investor open a company in order to manage their own fortune and pay taxes on capital gains?

I trade in cryptocurrencies and the gains are considerable. I would like to open a company to manage my own assets. Is that possible?

From the information I gathered by reading your articles, I believe that I am liable to pay capital gains taxes. For that reason, I would like to open a company in order to declare expenses related to my investment activities, if opening such a company is possible.

Thank you in advance for your feedback.

Kind regards.

 
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  • BenutzernameMoneyguru von moneyland.ch
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Hi there,

Whether or not opening a company as a private investor is beneficial depends on a number of factors. Unless you are categorized as a professional investor by the tax office, you will normally be better off investing as an individual rather than a company because as a private investor you do not pay capital gains tax. There are no fixed rules governing whether or not an investor is categorized as a private or professional investor for tax purposes. You may well be able to conduct your investment activities without being categorized as a professional investor, but this decision falls with your municipal and cantonal tax offices. If you open a company, you will normally be classified as a professional investor by default.

If you are categorized as a professional investor by the tax office, then opening a company can be beneficial in some cases. Registering a company can help you keep your personal and business accounts separate, and thus avoid tax complications. If you reside in a canton which levies high taxes, for example, then registering a company in a low-tax canton may help you avoid paying high capital gains tax on capital gains which you reinvest rather than take out as income. However, there are many factors which determine whether or not opening a company is beneficial, and consulting a qualified tax advisor for advice relevant to your specific situation is recommended.

The requirements for opening a company vary depending on the type of company in question. Registering a sole proprietorship (self employed) is relatively simple. However, in order to register as self-employed at the social security office, you may be required to prove that you have multiple customers, which can be problematic if you do not have customers but simply invest privately. However this regulation is primarily in place to ensure that people do not register as self-employed when they actually work for just one or two employers. If you work independently of customers, which is the case if you manage your own assets, then this may not be an issue. Make sure to discuss this with your local social security office before registering a sole proprietorship.

Depending on the scale of your investments and capital gains, there may be a specific category of company (a corporation or limited liability company, for example) that suits your specific needs.

Best regards from Moneyguru

More on this topic:
Taxes on trading profits in Switzerland
Swiss online trading platform comparison
Tips for investing in ICOs

 
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  • BenutzernameMoneyland User Questions
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Dear sir,

Thank you for your quick reply. I would like to reside in France, but it is better for me to invest professionally in Switzerland as I’m Swiss. I can’t find information on how my crypto transactions will be taxed. When you trade with crypto you are almost always using cryptocurrencies and not fiat currencies so I don’t know how to declare these for tax purposes.

Thanks again for everything.

 
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  • BenutzernameMoneyguru von moneyland.ch
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Hi there,

Tax laws governing cryptocurrencies are still being developed. In Switzerland, tax laws vary between cantons and municipalities. moneyland.ch is not a tax advisory service, and if you plan to build a company around cryptocurrency investment, then consulting a tax avisor that specializes in cryptocurrencies may be a good move.

The tax office of the canton of Luzern is the first tax office to have released clear information about the taxation of cyptocurrencies, and this information can serve as a guideline to the taxation of bitcoin and other cryptocurrencies in Switzerland. You can download the PDF (in German) here:

https://steuern.lu.ch/-/media/Steuern/Dokumente/SteuerBulletin/2017/SteuerPraxis201720BitcoinundCo.pdf?la=de-CH

The tax office of the canton of Zurich has since released information on this topic (in German), which you can find here:

https://www.steueramt.zh.ch/internet/finanzdirektion/ksta/de/aktuell/mitteilungen/amtsmitteilungen_2018/kryptowaehrungen.html

According to these informative papers, bitcoin (and cryptocurrencies which share bitcoin's properties in that they can be used to store value, transact value and act as an accounting unit) must be declared in the "additional assets" section of wealth tax declarations. You must declare cryptocurrency held at the end of the year. Providing a printed copy of a wallet statement or other report listing the amount of cryptocurrency held is recommended.

The Federal Tax Administration publishes an annual average rate for bitcoin, as it does for currencies. This rate is used by cantonal tax offices to calculate your taxable wealth. When an ESTV rate is unavailable, the purchase price which you pay for cryptocurrencies is used to determine taxable wealth. Fo this reason, providing proof of the purchase price of cryptocurrencies along with your tax return is recommended.

As with securities investments, capital gains derived from cryptocurrency investments are not taxed as long as you qualify as a private investor. If you are classified as a professional investor, capital gains must be counted as taxable income.

If you plan to live in France but run your investment company in Switzerland, make sure to choose a company type which allows for this option. The laws governing sole proprietorships vary between cantons, with some cantons allowing non-residents to own sole proprietorships in the canton, while other cantons require proprietors to be resident in Switzerland. In the case of a limited liability company (GmbH/Sàrl) at least one owner must reside in Switzerland. In the case of a corporation (AG/SA), at least one director must reside in Switzerland.

Best regards from Moneyguru

 
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  • BenutzernameHedgehog1
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>I can’t find information on how my crypto transactions will be taxed. When you trade with crypto you are almost always using cryptocurrencies and not fiat currencies so I don’t know how to declare these for tax purposes.

Same as any other business asset. When you sell a thing for more than you bought it's capital gains == fully taxable profit in case of a company

>I would like to reside in France, but it is better for me to invest professionally in Switzerland as I’m Swiss.

Not really

First, your company will be liable for corporate profit taxes, maybe 10-20% or so. On  the plus side however you can deduct losses from profit, but then you'd need to make some profit out of somewhere else in the first place

Second, if you take money out of the company, let's say in form of dividends you owe 35% withholding tax to the Swiss government. DBA treaty maybe will let you reduce it to 15%, I guess.

Third, the French government will also want a cut of your dividends too! Better check how much french taxes you owe trading as private individual, maybe it's less?

Fourth, you need a local director and pay him, a mailbox or something and probably also an accountant to do your tax paperwork. And a local bank account - also not free and more scrutinized than private personal accounts

All the trouble is not really worth it.