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Taxation of employee stock ownership tokens

Initial Coin Offerings (ICO), i.e. the raising of capital through the release of blockchain-based coins or tokens, are currently very much in vogue.


Beginning in late 2017, ICOs sprang up all over the world and became especially popular in the Zug’s Crypto Valley.


From a tax perspective, this cryptocurrency boom with its very high dynamic represents a major challenge. As far as ICOs are concerned, the various stages of an ICO must be taxed and are subject to the applicable laws.


In the course of our daily business with clients, we have recently been confronted with the question of how to treat investment tokens (known as asset tokens representing assets, such as shares in future corporate earnings) that are given to the employees of the ICO company.


Currently there are two concepts:


Monetary advantage concept («Zug Model»):

  • Employees receive a monetary benefit when they submit the investment token as employment income subject income tax; If an asset is blocked on the investment token, a discount is applied analogously to the tax treatment of blocked employee shares. The employee keeps the allocated investment tokens in his securities directory as a balance (at the exchange rate ESTV or year-end trading platform, alternatively to the original selling price in CHF).
  • Income from the investment tokens (for example, shares in future corporate income) is subject to income tax on the employee as income from the investment.
  • A capital gain resulting from the resale of the investment token remains tax-exempt (in private assets).
  • Company level: The difference between acquisition cost and fair value at disposal represents personnel expenses.


Expectation concept ("Zurich Model"):

  • There is no taxation when the investment tokens are handed over to the employees, as according to this concept there is an unauthorized employee participation (mere entitlement) and therefore there is no monetary benefit on allocation; The employee lists the received investment tokens per memoria in his or her securities directory.
  • Income from the investment tokens is subject to income tax for the employee as earned income.
  • On sale of investment tokens (realization): The entire sales proceeds are subject to income tax for employees as earned income.
  • Company level: When employees sell the investment tokens deductible personnel expenses in the amount of the sales proceeds.


This simple example shows how the tax consequences of an ICO can be assessed. In addition, the practice will be constantly monitored, as Swiss cantonal tax offices are not in agreement on all points. In practice, it is essential to carefully examine all stages of an ICO for tax consequences and to consult with the tax authorities in advance – especially because there are large amounts of money involved. The resulting tax risks are therefore significant and substantial for the entire project. We are happy to provide you with our know-how in connection with ICOs.


Bruno Beer


13 November 2018


Keywords: token, taxation, blockchain, crypto