Understanding VAT Implications for SAFT Fundraising and Token Launches in Switzerland

As Switzerland continues to establish itself as a global hub for blockchain and crypto innovation, startups frequently turn to the Simple Agreement for Future Tokens (SAFT) to raise funds. However, understanding the VAT implications of SAFT agreements and subsequent token launches can significantly impact your company's financial planning. Here's what you need to know.

1. VAT Treatment of SAFT Fundraising

When your Swiss-based company raises funds via a SAFT, you essentially enter into a financial agreement promising the future delivery of tokens. At this initial stage, Swiss VAT authorities typically view the SAFT as a financial instrument rather than a supply of goods or services. Consequently, raising funds through a SAFT is generally exempt from VAT (exempt without credit).

Example: A Swiss startup raises CHF 1 million via a SAFT agreement. No VAT is charged or due at this stage.

Key Takeaway: No immediate VAT applies during SAFT fundraising.

2. VAT Considerations Upon Token Delivery

The real VAT implications kick in once your tokens are actually launched and delivered to your SAFT holders. Here, the VAT treatment varies significantly depending on the category of your token:

Payment Tokens

Payment tokens, such as cryptocurrencies used purely for transactions (e.g., Bitcoin, stablecoins), are treated similarly to traditional currency under Swiss VAT law. As financial instruments, their delivery remains exempt from VAT (exempt without credit), meaning you cannot reclaim input VAT on associated costs.

Example: Your company issues a stablecoin designed for transactions. No VAT is charged upon delivery, and you cannot reclaim input VAT from associated marketing and legal fees.

Utility Tokens

Utility tokens represent access to future goods or services—such as software platforms, digital services, or event tickets. These tokens typically qualify as taxable supplies. Therefore, their issuance triggers VAT obligations if delivered to Swiss recipients. Importantly, utility tokens sold to customers outside Switzerland are generally considered exports and thus exempt with credit, enabling you to reclaim associated input VAT costs, including reverse-charge VAT.

Example: A Swiss software company issues utility tokens providing future access to its SaaS platform. Tokens delivered to Swiss users require VAT charging at the Swiss standard rate (8.1%). Tokens delivered abroad qualify as exports (0% VAT), allowing VAT recovery on input expenses.

Security Tokens

Security tokens, which resemble financial securities or investment instruments, are also VAT-exempt without credit, aligning them closely with shares or bonds. Consequently, no input VAT recovery is possible on related expenses.

Example: Your company issues tokens representing equity shares. Delivery is VAT-exempt, and the VAT incurred on related legal or advisory expenses cannot be reclaimed.

3. Reverse-Charge VAT and Input VAT Recovery

Swiss companies often incur reverse-charge VAT when purchasing services from abroad, such as consulting, marketing, or development costs related to launching tokens. The ability to reclaim this VAT depends on your token classification:

• Utility Tokens: Potential VAT recovery is possible if you clearly document intentions of delivering taxable services or products.
• Payment or Security Tokens: Reverse-charge VAT typically becomes a permanent cost, as no reclaim is available.

Example: You hire developers abroad for CHF 100,000, incurring reverse-charge VAT of CHF 8,100. If your tokens are utility tokens providing taxable services, you can reclaim this VAT. If your tokens are payment or security tokens, this VAT becomes a permanent cost.

Reverse-Charge VAT Scenario for SAFT Before Token Launch

Before token launch, while still under a SAFT agreement, the reverse-charge VAT incurred from foreign services typically cannot be reclaimed immediately. This is because, at this stage, the SAFT is seen as a financial transaction (exempt without credit). However, if you can clearly document that your future tokens are utility tokens associated with taxable services, you may reclaim this reverse-charge VAT once the tokens are issued and taxable activities commence.

Example: You incur CHF 50,000 in foreign consulting fees, triggering CHF 4,050 in reverse-charge VAT. Initially, this VAT cannot be reclaimed, but if the tokens launched are utility tokens related to taxable services, you can reclaim it once your taxable activities start.

4. Multiple Revenue Sources and VAT Reclaim

If your company has multiple revenue streams beyond token issuance—such as consulting, software licensing, or other taxable services—you may reclaim reverse-charge VAT incurred on costs associated with these taxable activities, regardless of your token classification. In this scenario, your taxable revenues provide a clear basis for input VAT recovery.

Example: Your company generates revenue from consulting services in addition to issuing security tokens. You incur CHF 20,000 in foreign marketing costs, triggering CHF 1,620 in reverse-charge VAT. Because your consulting services are taxable, you can reclaim this VAT despite your security token issuance being VAT-exempt.

5. Partial VAT Recovery When Expenses Serve Multiple Purposes

In situations where your expenses relate to both exempt (payment or security tokens) and taxable activities (consulting, marketplace fees, licensing), partial VAT recovery may be possible. This recovery is typically based on an allocation proportional to your taxable versus exempt revenues.

Example: Your company issues payment tokens but also operates a taxable digital marketplace. You incur CHF 100,000 in foreign developer fees, generating CHF 8,100 in reverse-charge VAT. If 40% of your revenue comes from marketplace operations (taxable) and 60% from payment tokens (exempt), you could reclaim 40% (CHF 3,240) of the reverse-charge VAT.

6. Additional Strategies for VAT Recovery

Companies may employ creative strategies to reclaim reverse-charge VAT, such as:

• Providing taxable ancillary services (consulting, training, support).
• Licensing proprietary software, IP, or other taxable assets.
• Offering taxable premium membership tiers or additional services alongside token issuance.

Example: Your company issues security tokens but also offers premium support or training packages to token holders. The revenues from these taxable services allow recovery of reverse-charge VAT incurred on associated foreign expenses.

7. How to Classify Your Token as a Utility Token

To ensure your token is classified as a utility token for VAT purposes, you must clearly document and demonstrate your intent to deliver future taxable goods or services. Importantly, a legal opinion from a law firm alone typically isn't sufficient. Instead, companies should submit a formal VAT ruling request to the Swiss Federal Tax Administration (ESTV) to obtain definitive clarification on the token’s VAT status.

8. Risks of Reclaiming Reverse-Charge VAT Without a Formal VAT Ruling

If your company attempts to reclaim reverse-charge VAT without obtaining a formal VAT ruling from the Swiss Federal Tax Administration (ESTV), you expose your business to potential tax risks. The ESTV may dispute your token classification or the taxable nature of your activities. In such cases, your company could face:

• VAT reassessments: ESTV may reclaim the previously deducted input VAT, leading to unexpected financial liabilities.
• Interest and penalties: VAT reclaimed incorrectly can trigger interest charges and additional penalties.
• Increased scrutiny: An incorrect or aggressive VAT reclaim may trigger closer examination by tax authorities in future audits.

Example:
A Swiss company issues tokens internally classified as utility tokens but does not seek a formal ESTV ruling. It reclaims CHF 20,000 in reverse-charge VAT based on internal assumptions. Later, the ESTV determines these tokens should have been classified as payment tokens (VAT-exempt without credit). The company must repay the CHF 20,000, plus interest and potential penalties.

Best Practice Recommendation:
Always seek a formal ruling from ESTV to provide clarity, minimize financial risks, and ensure compliance.

9. Hybrid Tokens (Payment and Utility) – VAT Treatment

Tokens frequently possess characteristics of more than one category—for instance, tokens simultaneously serving as payment instruments and granting access to specific services or features (hybrid payment-utility tokens). In such scenarios, Swiss VAT authorities typically analyze the primary purpose or predominant use of the token to determine its VAT classification.

How Hybrid Tokens Are Evaluated:

Predominant Purpose Classification (Default Approach)

In most cases, the Swiss ESTV classifies hybrid tokens based on their primary or predominant purpose:

• If the token’s main function is utility, the token is treated fully as a utility token (taxable). You can reclaim input VAT (including reverse-charge VAT) in full on related expenses.
• If the token’s main function is payment, the token is classified fully as a payment token (exempt without credit). Input VAT, including reverse-charge VAT, typically cannot be reclaimed at all.

Example (Predominant Approach):
Your company issues a token primarily used for transactions within your ecosystem (60%) but also grants limited access to premium services (40%). By default, the ESTV classifies the token as a payment token due to the majority usage for payments. Consequently, no reverse-charge input VAT is reclaimable.

Pro-rata (Partial Reclaim) Approach – Exceptional and Requires Approval

While uncommon, the ESTV can approve a pro-rata VAT reclaim (partial deduction) if you clearly document:

• Separate revenue streams specifically linked to different token functionalities (distinct utility services versus payment transactions).
• A transparent and documented cost allocation methodology linking expenses proportionally to each revenue stream.

Important:
This pro-rata method is not the default scenario and requires explicit approval through a formal VAT ruling from ESTV. Without a formal ruling, partial reclaim attempts can carry significant tax compliance risks.

Example (Pro-rata Approach):
Your company clearly demonstrates through documentation and revenue tracking that 60% of token revenue is payment-related (exempt) and 40% utility-related (taxable). With formal ESTV approval, you could reclaim 40% of reverse-charge input VAT incurred on shared expenses.

Conclusion

Navigating VAT regulations for SAFT fundraising and token issuance in Switzerland requires strategic planning. Clearly identifying and documenting your token category significantly impacts your VAT obligations and the possibility of reclaiming input VAT. Early professional advice, thorough documentation, and obtaining formal rulings from Swiss authorities are essential for optimizing your VAT position.

By proactively managing these considerations, Swiss blockchain companies can efficiently structure their operations, minimize unnecessary costs, and remain compliant with tax obligations.

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