Data protection in tax law: When is data shared?

Tax authorities as well as individuals regularly have highly sensitive financial data of taxpayers. This data may only be shared in accordance with data protection law.

Protection of sensitive financial data

Every person liable for tax in Switzerland is obliged to submit a complete and correctly filled out tax return annually. With the tax assessment, there is always an examination of the taxpayer's economic situation involved. The taxpayer must disclose income and wealth circumstances to the competent authorities, submit pay slips and bank statements, and declare debts. The taxpayer has an interest in protecting his private data, although the need for protection is not the same for all data.

Data sharing by tax authorities

The tax authorities are authorized to share financial data of taxpayers under certain conditions.

Certificate of Residency

In the context of cross-border trade relations, it may occur that foreign contracting parties ask the domestic company to certify its tax residency in Switzerland. The domestic company must demonstrate that it does not enjoy a special tax status but is taxed ordinarily in Switzerland. The certificate of residency is issued upon the taxpayer’s request, therefore, from a data protection perspective, consent is present. Moreover, the certificate is delivered to the taxpayer himself, not to the contracting party. Thus, data protection law is upheld.

Legal proceedings

If the taxpayer is involved in a civil lawsuit or facing criminal proceedings and there is a necessity to access financial data, the competent court or the responsible law enforcement authorities can demand the release of such information. The sharing in these cases is based on a legal foundation and thus in accordance with data protection law.

Data sharing by private entities

Private entities are also possibly authorized or even obliged to share tax data. This often occurs in connection with value-added tax related matters.

Payroll statement

The information contained in the payroll statement not only provides insight into the income circumstances of the taxpayer but also potentially affects the employer's liability for value-added tax. Because based on legal assumption all services declared on the payroll statement (e.g., company vehicle) are considered as rendered against payment, the employer must pay value-added tax on these. To fulfill its payment obligations, the employer must then disclose sensitive financial data to the Federal Tax Administration. The sharing of information is based on a legal foundation and thus also permissible under data protection perspectives.

Duty to provide information

The Federal Tax Administration is also entitled to request sensitive data about value-added tax-liable companies from third parties obliged to provide information if this data is necessary for determining tax liability or calculating the tax claim. The Federal Tax Administration usually makes such inquiries only in the presence of a specific suspicion of tax evasion. Since the sharing again is based on a legal foundation, data protection law is upheld once again.

Foundations in data protection law

The sharing of tax data usually takes place based on legal provisions. Besides the legal foundation, the taxpayer's consent as well as overriding public or private interests are also possible justifications for sharing.

Source: Weka article: Data protection in tax law: When can data be shared? From March 10, 2020, accessed from <https://www.weka.ch/themen/steuern/juristische-personen/steuerliche-sonderstati/article/datenschutz-im-steuerrecht-wann-duerfen-daten-weitergegeben-werden/> on September 28, 2021.

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