DeFi: classification and taxation in Switzerland

Decentralised finance (DeFi) brings together protocols that replicate financial functions — lending, exchange, deposit, liquidity provision — without traditional intermediaries, through smart contracts. For those who take part, in Switzerland the topic splits in two: on one side the legal classification of the activity, on the other the tax treatment of the proceeds. Neither dimension has a single rule: they depend on the concrete nature of the transaction. Let’s see how to frame the reasoning.

There is no “DeFi taxation”: there are transactions

The starting mistake is to look for a rule valid for all of DeFi. In reality taxation follows the economic substance of each transaction. Providing liquidity to a pool, lending tokens in exchange for interest, receiving staking rewards or collecting fees are economically different activities and must be qualified one by one. The guiding principle is the ordinary one of Swiss law: you look at what actually happens, not at the technological label.

Individuals: wealth management or gainful activity

For an individual resident in Switzerland the fundamental distinction is between private wealth management and independent gainful activity. In the first case, current income (such as interest and rewards) is generally taxable as income, while capital gains realised on private wealth may, under certain conditions, be treated differently. When instead the activity takes on the traits of a professional operation — high frequency, use of leverage, systematic deployment of instruments and capital — the classification changes, with consequences for taxes and social insurance. The dividing line is assessed on the established criteria of Swiss practice.

Typical proceeds and their treatment

Some recurring situations:

• Lending interest. Anyone who lends tokens and receives remuneration generally earns taxable income, to be valued at the CHF equivalent at the time of the credit.
• Liquidity-providing and staking rewards. The tokens received as a reward generally constitute income at the moment they accrue and are available.
• Gains from exchange. The conversion between tokens can realise gains or losses, whose treatment depends on the classification (private wealth or gainful activity).
• Airdrops and incentives. Free token allocations must be assessed case by case according to the reason for the attribution.

Companies and DeFi

For a company the picture is more straightforward at the level of principles: proceeds from DeFi activity contribute to taxable profit and the crypto-assets on the balance sheet fall within taxable capital, according to the ordinary rules of accounting and taxation. The practical difficulties remain, however: valuation of positions, documentation of prices and on-chain transactions, traceability of flows through the protocols. The accounting must be set up well from the very first financial year.

VAT and anti-money laundering

The VAT treatment depends on the nature of the service: many financial transactions are excluded or exempt, but the qualification must be made case by case. On the anti-money laundering front, individual participation in protocols is different from carrying out an intermediation activity: when services are offered to third parties, obligations may be triggered that require authorisations.

Documentation is the real critical point

The most concrete problem with DeFi is not the tax principle but the proof: transactions across multiple protocols and blockchains, multiple addresses, continuous conversions. Without orderly tracking — with CHF equivalents at the relevant dates — the tax return becomes impossible to defend. Setting up a reporting system from the start is the part that really makes the difference.

Our role

SIH ONE offers structuring and advice: qualification of transactions, accounting and tax set-up, organisation of documentation. Activities subject to authorisation go through authorised partners.

This content is informational and does not constitute tax advice. Every DeFi situation must be verified in the specific case.

Do you take part in DeFi protocols and want a clear, defensible tax classification? Let’s analyse your transactions together. Let’s talk.