Voluntary Tax Disclosure General disclosure of income and assets for tax purposes in Switzerland

Most foreigners arriving in Switzerland also become tax residents. Exceptions may apply for business travellers and individuals who keep their habitual abode in their home country, so-called international weekly commuters. Tax residents in Switzerland are obligated to file an annual tax declaration in which all worldwide income and assets must be reported.
Irrespective of where the assets are based, e.g. foreign bank accounts, stocks, real estate or the value of a foreign business and irrespective of where the income stems from, e.g. foreign dividends, interests, rental income, all must be declared on the Swiss tax return. 
Needless to say, that the Swiss "tax jungle" may appear overwhelming for individuals just arriving in Switzerland and that either income or wealth or both, even without any bad will being present, may have missed to be reported on the Swiss tax return.


Unpunished voluntary disclosure of income and assets

Since 2010 it has been possible to make a "first" voluntary disclosure of such income and assets to the tax authorities, notably without any penalties being imposed. The penalties would under normal circumstances range from one-third up to three times of the evaded taxes. Any evaded taxes related to such disclosed income/asset including standard late payment interests are still due when disclosing such income/asset.

The statute of limitation is 10 years, so the tax authorities expect any missed income or wealth for all relevant years to be reported.

According to federal statistics more than 60'000 individuals have benefited from using the unpunished voluntary disclosure regulation.


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Per Melberg is a Managing Partner of Exactio Ltd.

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Introduction of the Automatic Exchange of Information

As of 2017 the Automatic Exchange of Information (AEOI) came into force, which means that the Swiss authorities since then receive information about Swiss tax residents and their foreign investments etc. directly from foreign financial institutions and countries.

The first exchange took place in 2018 and the Swiss Federal Tax Administration (FTA) recently announced that it has exchanged information with 75 countries, covering approximately 3.1 million financial accounts. Likewise, Switzerland has received information from abroad on around 2.4 million financial accounts.

Next year the FTA expects around 90 countries to be covered by the AEOI. Hence, data is being gathered at this moment and it is only a question of time until the Swiss tax authorities receive the information from the countries participating in the AEOI.


What does this mean for the "unpunished voluntary disclosure" process? 

Although the Swiss tax authorities claim that any information received under the AEOI process does no longer qualify for the "unpunished voluntary disclosure", it is still recommended to Swiss tax residents, who may suffer from gaps in their reporting for past tax years, to make a voluntary disclosure.

Many cantons have a pragmatic approach to imposing penalties, even if they already have the relevant data gathered through the AEOI process. In addition, they have the flexibility on the range on penalties from one-third to three times of the evaded tax.

A pro-active and constructive cooperation from the taxpayer creates goodwill and, even if penalties are imposed, they may more likely be found in the lower end of the range set by law.

In conclusion, we recommend individuals, who may have missed to report income or wealth for past years to disclose this in a proactive way with the relevant tax authorities.

Author: Per Melberg

Per Melberg is a Managing Partner at Exactio Ltd., a Swiss based advisory company that is specialized in providing professional tax and social security advisory services to individuals living and working in Switzerland. He has lived in Switzerland for more than 20 years working with international staff all over the world. He is dedicated to use all his experience supporting mobile individuals and their families moving to and from Switzerland.

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