Penalty-free voluntary disclosure and simplified taxation for heirs – Part 3: The penalty-free voluntary disclosure

In recent years, especially since the financial crisis of 2007/2008, there has been an increased crackdown on tax fraud and evasion. The focus is not only on preventing future tax crimes. In Switzerland, the penalty-free voluntary disclosure and simplified taxation of heirs provide an incentive for bringing previously untaxed income and assets into legality. Findea explains these concepts in a four-part series of articles. This third article is dedicated to the penalty-free voluntary disclosure.

As outlined in the second article, the penalty-free voluntary disclosure is only possible for direct federal tax as well as income and wealth taxes of the cantons and municipalities. As the name suggests, it involves a self-report by a person who has evaded taxes themselves. With the new regulations valid since January 2010, any person can report themselves once without facing punishment. However, they must pay the back taxes for up to the last ten tax periods, as well as the applicable late payment interest.

However, this option is not always possible. It is subject to three conditions according to Art. 175 Abs. 3 DBG and Art. 56 Abs. 1bis StHG:

1. The evasion must not already be known to any authority
2. The person must unconditionally support the administration in assessing the back tax; and
3. They must seriously endeavor to pay the owed back tax.

Persons who intentionally incite tax evasion, assist in it, or as a representative of the taxpayer cause or contribute to tax evasion, may also submit a penalty-free voluntary disclosure once. They only need to fulfill the 1st and 2nd conditions. This is regulated in Art. 177 Abs. 3 DBG and Art. 56 Abs. 3bis StHG.

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