Synthetic Cash and Its Taxation: The Swiss Case
22 Pages Posted: 17 May 2018
Date Written: May 4, 2018
Synthetic cash can be defined as a combination of non-debt financial instruments that provides, before tax, the same return as a debt instrument but under the form of capital gains rather than income. In countries where capital gains are taxed at a different rate than income, the existence of synthetic cash represents a real tax arbitrage opportunity. This article explores the tax treatment of synthetic cash in Switzerland, a country where capital gains are generally tax exempt. We discuss the various defense mechanisms available to the Swiss tax authorities to fight against synthetic cash, as well as the emergence of virtual currencies, which could constitute the next generation of synthetic cash.
Keywords: Tax Arbitrage, Income, Capital Gains
JEL Classification: G23, H20, H26
Suggested Citation: Suggested Citation