Commencing disputesi Initiation of the tax assessment procedure
Each individual subject to tax in Switzerland needs to file a tax return each year in relation to income and wealth taxes on a self-assessment basis normally within three months of the end of the tax period, corresponding to the calendar year. Most cantons allow at least a deadline extension. The same applies to legal entities subject to corporate tax in Switzerland.
With regard to partnerships (sole or collective proprietorship), income is attributed to each partner and is apportioned according to the investment in the partnership. Each partner is responsible for filing his or her own personal tax return and tax is paid at personal income tax rates. Wealth tax is moreover paid on the company's assets.
Regarding withholding tax, stamp tax and value added tax (VAT), the principle of 'spontaneous taxation' applies, meaning that the taxpayer must determine himself the amount of tax due, declare it and pay said amount to tax authorities.
In the field of taxes related to possession (e.g., cars, boats, dogs) and property transfer tax, taxation takes place by way of an administrative decision generally following the announcement from the taxpayer. The latter then has to pay the tax.ii Issuance of the tax assessment decision
After the filing of the tax return, it is reviewed by the responsible tax commissioner and an assessment decision issued by the tax authority follows. In this respect, it should be noted that the cantonal tax authorities can assess cantonal income taxes in respect of individuals and legal entities, as well as direct federal tax, which includes income tax. Other taxes (e.g., withholding tax, stamp tax and VAT) are assessed by the Federal Tax Administration only.
The assessment decision determines the tax base, the applicable tax rate and the tax amount. This decision is an administrative decision, notified in writing to the taxpayer and jointly to the spouses. In the absence of an objection, it constitutes a final binding decision.
In the presence of indicators showing that the tax return would not be accurate, the tax authorities may deviate from it after investigation. In this regard, it should be noted that the taxpayer has additional duties relating to their general duty to collaborate with tax authorities for ensuring that the taxation is complete and accurate. On request, they must provide additional information, documents, accounting documents, etc.
In the case where the taxpayer does not comply with their obligation to file a tax return or if the taxable elements cannot be sufficiently determined, the tax authority is entitled to assess the tax due at its own discretion with regard to the factual elements at its disposal and empirical figures.iii Initiation of tax disputes
Tax disputes usually start by way of an appeal by the taxpayer against a tax assessment decision rendered by a tax authority. At this early stage, the taxpayer has to file a formal complaint before the same tax authority that made the assessment decision. In the fields of withholding tax, stamp tax and VAT, disputes usually arise as a result of a tax audit conducted by the Federal Tax Administration.iv Time limits
In situations where the taxpayer does not comply with their obligation to file a tax return or if the taxable elements cannot be sufficiently determined, the tax authority is entitled to assess the tax due at its own discretion with regard to the factual elements at its disposal and empirical figures.
As a general rule, the right to tax expires five years after the end of the accounting period. This time period is suspended during appeal proceedings. A new five-year time limit starts every time the competent authority takes measures aiming at determining or getting the payment of the tax due and informs the taxpayer. In general, there is an absolute time limit of 15 years.v Voluntary disclosure
An important element of the Swiss tax disputes is the voluntary disclosure system. Under Swiss tax law, taxpayers are offered a voluntary disclosure programme for undeclared assets and income, which are subject to taxation in Switzerland. The voluntary disclosure programme is also available to heirs in the case of inheritance.
For both voluntary disclosure in inheritance cases and ordinary voluntary disclosure, there is no criminal prosecution (no penalties). The taxpayer thus only has to pay the due taxes and default interests for the past 10 years or the past three years before the decedent's death.
To benefit from the voluntary disclosure programme, the application must be filed for the first time in the taxpayer's lifetime and deemed voluntary. The taxpayer has to disclose all relevant information of the last 10 years and has to cooperate with tax authorities. Heirs only need to regularise the last three years before the testator passed away. The taxpayer must endeavour to clear the total tax burden eventually and act proactively in cases of financial difficulties.
The duration of the procedure depends on the canton involved and mainly on the complexity of the case.
As of 30 September 2018, disclosures relating to assets held in jurisdictions with which Switzerland has an automatic exchange of information in place are no longer regarded as being voluntary and may not benefit from the voluntary disclosure programme anymore. Voluntary disclosures remain possible with respect to assets that are not covered by the automatic exchange of information.vi Revision
In the cases where the taxpayer was not aware of materially incorrect facts taken into account by the tax authority during the assessment or the audit, they may claim that the authorities have made an error of assessment based on the incorrect facts (petition for revision). Said petition for revision is only considered if important new facts or evidence are discovered and could not have been known during the ordinary proceedings, if the tax authority failed to consider important facts that were or should have been known, in the case of a significant violation of procedural principles, or if a crime or criminal offence influenced the tax assessment or decision.vii Release of information
According to the Federal Constitution, all taxpayers, within a certain time and factual limits, have the right to access their tax files. This may be a useful tool for taxpayers.