Voluntary disclosure • what you need to know
Didn’t my parents sign over an offshore account some time ago?
I own a property abroad that I’ve never included in the Swiss Tax declaration since the property is situated abroad
Does this sound familiar to you?
Or is there a similar scenario sitting heavily on your stomach for years because you may be insecure whether the assets have been declared correctly for tax purposes – or whether they have been declared at all?
Black money, tax evasion, automatic exchange of information in tax matters… Ordinarily one does not like to deal with these issues. For the people concerned they often come with worries and insecurities and may lead to emotional strain.
There may be different reasons why assets remain untaxed, respectively why bank accounts are not declared to the tax authorities – saving taxes may only be one of many reasons.
It may take some time for the person concerned to evaluate the situation and to weigh the options before he or she eventually decides to clear the air. After all, the assets might have been undeclared for centuries and a change of mindset may not always be easy for the people involved.
In my experience as a certified tax expert I have advise numerous people during their assessment process and it has repeatedly been brought home to me how severely such situations can put a strain on the people concerned and their entire families.
The good news is that from a fiscal point of view these matters can rather easily be mended. Since 2010 the Swiss tax law knows the “small tax amnesia”, which entailed the possibility of non-punishable voluntary declarations.
Non-punishable voluntary disclosure – what does that mean?
There are two main scenarios of a non-punishable voluntary declaration of assets:
First, when a person subject to tax voluntarily declares tax evasion for the first time, the person will not be subjected to criminal sanctions. However, retroactive tax and late interest on the respective amount have to be paid for these tax periods.
In the second scenario, the person concerned has inherited undeclared assets and may wish to submit a non-punishable voluntary declaration. Where the heirs notify the tax authorities that the deceased person has not correctly declared all tax factors, the retroactive taxation on the assets only concern a time period of three years before the moment of decease instead of the ordinary ten years period.
Conditions of a non-punishable voluntary declaration:
The tax payer
submits a voluntary declaration for the first time;
has become active on its own initiative, i.e. the tax authorities had no prior knowledge of the relevant circumstances;
has to cooperate with the tax authorities without reservation in order to solve the matter;
has to undertake a serious effort to pay the retroactive tax and late interests.
When the voluntary disclosure was first introduced in Switzerland in 2010, it was the general assumption that the number of voluntary declarations would rise in the first few years and flatten in subsequence. According to the latest figures, however, there has never been as many voluntary disclosures in Switzerland as in the year 2014.
Because four years after the introduction of the “small tax amnesia” the number of voluntary disclosures has not yet decreased, politicians have claimed to limit its application in time. Whether these political requests have any chance of success remains uncertain.
In principle the non-punishable voluntary disclosure can be submitted in any form.
It is essential that the person concerned discloses all undeclared assets once and for all – as the voluntary declaration goes unpunished only the first time.
For the purposes of substantiation, however, I suggest to submit the declaration well documented and in writing. Given the importance and the potential consequences of an incorrect or incomplete declaration of assets it is further recommended consulting a certified tax expert to establish the relevant facts and to support you with the preparation of such declaration.
Thus, I personally entrust to everybody to fully disclose all assets sooner rather than later.