Zug, a centre for technology and finance in Switzerland, wants to “set an example” to others by offering payment services in the digital currency, the council said in a statement.
From July 1st residents of the central Swiss city will be able to make payments for some council services up to a value of 200 francs in bitcoin.
In the statement, the mayor of Zug Dolfi Müller said: “We want to express our openness to new technologies.”
The council would invite financial technology companies in the area – where the headquarters of Bitcoin Switzerland is based – to discuss ideas in order to “understand how to meet their needs for an optimal development of our living and working environment”, he said.
Initially a pilot project, the scheme will be assessed at the end of 2016 before the council decides whether to extend the payment system to other services or larger amounts.
“Paying your taxes by bitcoin is no longer just a future dream but a realistic possibility,” Müller told local paper Neue Zuger Zeiting.
Zug traditionally has one of the lowest tax rates in Switzerland, making it attractive to big businesses as well as individuals.
Bitcoin is a digital monetary unit with no central authority or bank, which is subject to currency fluctuations.
Transactions can be made electronically on a secure, encrypted system.