Following the example of many of its European neighbours, Switzerland has a tax amnesty system allowing taxpayers to regularize their tax situation. The federal law of March 20, 2008 on the simplification of the tax reminder in case of inheritance and on the introduction of the non-punishable spontaneous denunciation provides for a partial amnesty regime with a permanent vocation. What are the details? This law has been in force since January 1, 2010 and applies to federal, cantonal and municipal taxes. It provides for two important measures:
  • a simplified tax reminder for the heirs on the elements of the wealth and income evaded by the deceased
  • a mechanism of spontaneous self-reporting without penalty

For the heirs: regularize the situation of the deceased

The first of these measures allows the heirs to regularize the undeclared income of the person they are inheriting by paying the evaded taxes and the default interest due by the deceased for the last three years preceding his death. Prior to the adoption of this law, the administration could rectify this income over a period of ten years. This penalized the heir, who was often unaware of the undeclared origin of the funds. To benefit from this so-called “simplified” tax reminder, each heir must demonstrate that three conditions have been met:
  1. no tax authority has knowledge of the tax evasion committed by the deceased;
  2. the heir is willing to cooperate unreservedly with the tax authorities in the determination of the taxes;
  3. he/she endeavours to settle the amount due.
Within the framework of this regularization, the heirs are jointly and severally liable for the payment of the taxes due within the framework of the tax reminder, up to the amount of their inheritance share.

For all taxpayers: regularization of undeclared income

The second measure consists of the abolition of fines and a penal amnesty for people who have not declared some of their taxable income and who spontaneously denounce themselves. This amnesty covers taxes on income and wealth, at the communal, cantonal and federal levels, but excludes social security (AVS, etc.). Conditions similar to those listed above, concerning heirs, must be met. Thus, a tax regularization is only possible if:
  • no tax authority is aware of the offence
  • the taxpayer cooperates fully with the administration in determining the amount of the tax assessment
  • the taxpayer pays the evaded tax and the default interest due for a maximum period of 10 years.
This possibility to regularize one’s concealed income is open only once and is addressed to both individual and corporate taxpayers. In case of recidivism, a fine, however reduced to one fifth of the tax evaded, is applied.

What developments to expect?

Following the condemnation in principle by the Federal Court of the cantonal initiatives in this matter, several cantons, such as Fribourg and Valais, were in favor of the adoption, at the federal level, of a law providing for a general tax amnesty. Parliamentary initiatives had been launched in this sense and argued in favor of easing the conditions for regularization. However, these initiatives were recently withdrawn, so that at present no bill providing for less onerous conditions for regularization is likely to be discussed in Parliament.

The need for action

Considering the progressive lightening of banking secrecy, the tightening of investigation measures, the lengthening of the statute of limitations as well as the intensification of the exchange of information with third countries, we can only advise taxpayers with assets derived from undeclared income to seek advice from a professional who is able to guide them in the procedure of regularization of their tax situation. Indeed, as the parliamentary initiatives related to the adoption of a general amnesty have been aborted, it is unlikely that a new law will be adopted before January 1, 2018. This date will mark the entry into force of the automatic exchange of information with the European Union. However, the knowledge of the offence by an administrative authority is an obstacle to tax regularization and therefore to the protection of the taxpayer against the normally applicable criminal and tax sanctions. Swiss residents holding, in person or via a foreign structure, accounts abroad, will therefore be identified because of this automatic exchange of information. It is generally in their interest to regularize their situation before the tax authorities have been informed, in particular because this allows them to avoid sanctions.