Discretionary assessment: Estimation of taxable income

If a taxpayer fails to submit the completed tax return after a single reminder, the tax authorities will proceed with a discretionary assessment. In doing so, they base their assessment on empirical figures, asset development, and the living expenses of the taxpayer.

In Switzerland, individuals subject to ordinary taxation must fill out their tax returns annually within the specified deadlines. Those who do not comply with this obligation, even after a reminder, can expect not only a fine for violation of procedural obligations (Art. 174 DBG) but also a discretionary assessment (Art. 130 DBG).

Purpose and Significance of the Discretionary Assessment

The discretionary assessment is used to determine the taxable income and tax owed by a taxpayer. If the taxpayer has neglected to submit the necessary documents for assessing the tax burden, the authorities can determine the relevant facts through the discretionary assessment. Moreover, the discretionary assessment serves as a protective measure for all taxpayers willing to pay, as it ensures that no one can evade taxation by simply not submitting their tax return. Thus, the equal treatment of taxpayers is ensured.

Conditions for the Discretionary Assessment

A discretionary assessment is carried out by the tax authorities only when there is a gap in the facts. This occurs when the taxable income and tax owed cannot be determined due to the taxpayer's lack of cooperation or objective impossibility. Before carrying out the discretionary assessment, there is usually a reminder in cases of non-cooperation, or an investigation in case of objective impossibility.

Methods of Discretionary Assessment

When conducting a discretionary assessment, the tax authority may take into account empirical data, asset development, and the living standard of the taxpayer. If the assessment is based on empirical data and asset development, the authority relies on tax declarations from previous years, typical comparative values, and established forecasts. In the case of a discretionary assessment based on living standards, the presumed income of the taxpayer is estimated based on their expenditures. If there is a complete lack of relevant values, the tax authority may also make an intuitive assessment. The method that involves the least uncertainty should be applied in each case. The assessment by the tax authority should also be limited to the part of the case that cannot be quantified in terms of amount.

Challenging a Discretionary Assessment

A taxpayer can challenge a discretionary assessment only due to obvious inaccuracies. Consequently, the taxpayer has no right to challenge an assessment that is only slightly elevated. This can result in higher taxes being due than if the tax return had been properly filled out. The objection against the discretionary assessment must be substantiated and must name any possible evidence.

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