Initial Coin Offerings

Case 1: App Token

Basic facts

A Belarus-based software engineer has developed a novel app that aims to better connect providers and customers of certain services.

It is intended that a limited liability company (SwissCo) based in the canton of Zug will raise the funds required for the further development and operation of the app by means of an ICO and issue tokens for this purpose.

In order to use the app, both providers and customers must have tokens in their wallet. The more tokens a provider or customer has, the faster they are connected with customers or providers on the app.

The tokens establish rights of use with respect to the platform, but no rights of participation or property rights with respect to SwissCo.

The tokens will be freely tradable via crypto exchanges or similar platforms at a later date.

The tokens are allocated as follows:

15% of the tokens will be given to the founder of SwissCo as consideration for the intellectual property rights contributed by the founder.
10% will be given to potential service providers as part of a pre-sale phase. These are sold at a discount of 30%.
The remaining 75% will be sold to potential customers in exchange for FIAT money during the public sales phase.

The consideration for the purchase of the tokens can be paid in FIAT money or in Bitcoin (BTC), with SwissCo immediately exchanging cryptocurrency received into its functional currency CHF. SwissCo is raising a total of approximately CHF 50 million through the ICO.

Questions

How do tokens qualify under civil and regulatory law?
What are the tax consequences associated with the ICO?
How is SwissCo to be taxed on an ongoing basis after the ICO?
How are (domestic and foreign) token holders to be taxed?
What is the tax treatment of token sales?

Variant 1

What differences would arise if SwissCo were established in the form of a foundation rather than a limited liability company? Which reasons speak for and against the use of a foundation in the specific case?

variant 2

Within the scope of the ICO, no FIAT money will be collected, but only Bitcoins. These will only be exchanged for FIAT money by SwissCo when SwissCo has to pay invoices in FIAT money. How are any price gains on the Bitcoins to be treated for tax purposes?

Variant 3

SwissCo employees are given tokens free of charge as part of a participation plan. How are these to be treated for tax purposes at SwissCo and the employees if

the tokens are given unconditionally without a lock-up period?
the tokens are subject to a lock-up period of 3 years without further conditions?
the tokens are subject to a lock-up period of 3 years and "expire" if the employee leaves SwissCo before the lock-up period expires?

Case 2: Success token

Basic facts

A Zug-based limited liability company (software company) wants to develop software and sell it on the market once the product is ready. The funds required for the development are to be raised from new investors (independent third parties) by means of an ICO.

The tokens issued in this context entitle the token holders to 3% of the annual gross sales proceeds of the GmbH's software. Beyond that, the tokens do not convey any asset or membership rights. Nor are any special functionalities (such as rights of use) associated with the tokens.

The tokens will be freely tradable via crypto exchanges or similar platforms at a later date.

Questions

How do tokens qualify under civil and regulatory law?
What are the tax consequences associated with the ICO?
How is SwissCo to be taxed on an ongoing basis after the ICO?
How are (domestic and foreign) token holders to be taxed?
What is the tax treatment of token sales?

Variant 1

What differences would arise if the token holders, instead of having a claim to the sales proceeds, have a claim to (i) 30% or (ii) 60% of the EBIT of the GmbH?

variant 2

What differences would arise compared to variant 1 if the founders of the GmbH themselves acquire 40% of the tokens on the occasion of the ICO and the remaining 60% of the tokens are acquired by independent third parties?

Variant 3

What differences would arise if the Token Holders were entitled to a consideration in the amount of the dividend distributed by SwissCo in each case?

Variant 4

What differences would arise if the token holders had a claim (subordinated to the other debt capital) to repayment of their contribution at that time upon liquidation of SwissCo?

Case 3: Mortgage Token

Facts

A limited liability company based in the canton of Zug (SwissCo) wants to raise funds in the context of an ICO in order to use them to acquire or grant mortgage loans for domestic real estate secured by promissory notes. It will issue 20 million tokens with a nominal value of CHF 1 per token at an issue price of CHF 1.05. SwissCo will ensure that the nominal value of CHF 1 per token is covered by promissory notes at any time.

The token issued by SwissCo gives the token holder the right to a minimum annual interest credit depending on the interest rate of the mortgage portfolio. However, this is not paid out during the term of the token, but is only shown arithmetically. In addition, SwissCo can allocate an additional interest credit to the token holders on a discretionary basis depending on the SwissCo earnings situation (this mainly as a positive sales argument for future token sales).

The term of the tokens is unlimited. In the event of a liquidation of SwissCo, the token holders will receive back the nominal value plus the interest credits.
The tokens will be freely tradable against FIAT money and other cryptocurrencies via established internet platforms without SwissCo's intervention.