Tax alert for expats & resident foreigners Avoid potential heavy fines by acting now

In 2017, the international tax agreement AEOI (Automatic Exchange Of Information) entered into force in over 70 countries.

You need to review this information carefully and consider acting if:

  • You are taxable in Switzerland
  • You have any finances or property in another country
  • You want to avoid fines and expensive tax penalties  
     

Tax fines - need to know

Switzerland's tax authorities and tax authorities in over 70 partner countries have already started to exchange transparent financial information about the assets and wealth of private individuals such as yourself.

Individuals in Switzerland now only have until end of 2017 to declare assets and avoid heavy fines (details below). This can be achieved in a process called "unpunished voluntary disclosure". 

AEOI, the Automatic Exchange of Information, is already in force (or is about to come into force) between Switzerland, all EU countries, and a further 50 countries, including "tax havens" such as the Cayman Islands or Bermuda.
 
 

Are you at risk?

You are particularly at risk if:
  • You haven't declared all of your worldwide assets, income and wealth in your Swiss tax return. Either knowingly or unknowingly - see Case Studies below for examples.
     
  • You don't submit a tax return because you earn less than CHF 120,000 annually, but you have significant income or wealth abroad, for example a house.
If the above applies to you, we highly recommend a tax situation check. There is time until end of 2017 to apply to Swiss tax authorities for an "unpunished voluntary disclosure".

 

Taking appropriate action

Hello Switzerland is cooperating closely on this urgent matter with the Global Mobility team at BDO Switzerland.


Your contact: Gordana Muggler

Gordana Muggler, BDO Switzerland, Global Mobility

Gordana Muggler is Head of Global Mobility and HR Services at BDO Switzerland.

BDO's experienced specialists are here to advise and support you and your family members on all aspects of international assignments, be it concerning the arrival to Switzerland or the deployment abroad.

Phone number: +41 44 444 37 29

Email address: gms@bdo.ch


BDO is a leading financial advisory company with a global presence of over 64,300 people in 154 countries, as well as a strong local network of 33 offices in Switzerland.

BDO Switzerland's International Tax and Global Mobility team is well prepared to handle AEOI enquiries. They are at your disposal to confidentially discuss your personal situation.

Fees for tax advisory services are determined individually, based on hourly rates of CHF 200-400 excluding VAT.

In consideration of your personal privacy, BDO advises its clients under strict confidentiality agreements and communicates using securely encrypted email.


 

 

 

Impact of AEOI on resident foreigners

Switzerland's international community is highly exposed to the new legal requirements. Switzerland requires its taxpayers to declare all worldwide income and assets. But accounts, property, income or other assets you hold (or held) abroad may have not been correctly declared in your Swiss tax return - often due to oversight.
 
If this applies to you, you will be taxed retrospectively, including due interest, and should expect a significant fine of up to three times the evaded tax.
 

 

AEOI Timeline

Until the end of 2017, most cantonal tax authorities will allow previously unreported assets to be voluntarily declared without punishment. To encourage individuals to rectify their situation, taxes and interests will be charged but the penalty will be waived.

By 2018 the Swiss authorities will have begun to analyse the data received from foreign financial institutions.

Individuals who wait until the authorities contact them will no longer be able to benefit from the penalty waiver.

Any individual who has unreported income or assets should therefore act in 2017 to rectify their situation in the period of grace granted by the Swiss tax authorities.

 

Example situations of RESIDENT FOREIGNERS exposed to risk of retrospective tax and risk of fines

 
Case study 1
From the very beginning of his/her expatriation to Switzerland, a taxpayer has deliberately decided not to declare any foreign bank accounts and real estate, under the motto that it is none of Switzerland's business.
 
This case is crystal clear. Here, in addition to retrospective taxation, a tax penalty and higher fines are to be expected.
 
People in this situation can make use of the unpunished voluntary disclosure.
 
Case study 2
A locally employed foreigner in Switzerland earns CHF 120,000 or more, and must submit a tax return. Since he/she always paid taxes in his home country on the rental income from the property located there, he would never have thought of declaring this property in Switzerland. The rental interest is paid to a bank account in the same foreign country, and, based on the same logic, the account has also remained undeclared.
 
Since all the worldwide assets and income have to be declared in the tax declaration, the taxpayer should react before the home country reports the bank account to Switzerland. If he/she does not do this, he/she can expect retrospective taxation and a fine. In the course of this, it is likely that also the house abroad will be "discovered", which would lead to further taxes and fines.
 
This also applies to taxpayers who have undeclared holiday homes.
 
Case study 3
Case study 2 also applies to foreigners who earn less than CHF 120,000 per annum and do not submit a tax return. In this case, in addition to requesting an unpunished voluntary disclosure, the taxpayer must contact the Swiss tax authorities to request an ordinary taxation procedure and declare the property.
 
Case study 4
A taxpayer has invested in a variety of financial products such as the English ISA or a trust in Malta. The set-up was chosen and a tax analysis undertaken before the person was resident in Switzerland. He/she never thought about whether the move to Switzerland would require any action. The assets remain largely undeclared to the Swiss tax authorities, especially since the taxpayer interprets them as "pension assets".
 
When these assets are reported under the Automatic Exchange Of Information, the local Swiss tax administration will take the first step and will investigate the foreign financial instruments. If it comes to the conclusion that the assets and/or income are actually taxable in Switzerland, then the person concerned can expect a retrospective taxation procedure as well as a fine.
 
This taxpayer should declare the undeclared assets and proactive informing the tax authorities of the reasons why these assets are actually irrelevant for Switzerland.
 
Case study 5
A taxpayer had his/her own Limited Company prior to the move to Switzerland. The shares still belong to him/her. Since the value of a Limited Company cannot be determined, the taxpayer felt that it should not be declared as an asset in Switzerland. Withholding tax was paid on the income (i.e. dividends) abroad in a foreign country. The taxpayer did not recover the withholding tax.
 
In this case, urgent action needs to be taken. All world-wide assets and income must be declared in the Swiss tax declaration. In this case there is clearly income that Switzerland could have taxed.
 

 

Help with tax & legal issues in Switzerland

Do you require assistance with taxation, legal or social security issues?

Hello Switzerland and our partner BDO can assist you. Due to the sensitive nature of this topic, please contact BDO directly on +41 44 444 37 29 or at gms@bdo.ch.

 

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