Regulations for the refund of withholding tax are being relaxed.
The Federal Council plans to refund the withholding tax even on negligently unreported income, in response to criticism of strict court rulings.
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In the future, withholding tax should also be refunded if the underlying income was negligently not declared. With this, the Federal Council is responding to the criticism of the numerous and strict Federal Court decisions.
Strict Judgments
As described in our series of articles on withholding tax, withholding tax exists for the purpose of preventing tax evasion. It is levied on income from movable capital assets (especially dividends, interest, and lottery winnings), on annuities and pensions, and on certain other insurance benefits. However, it is refunded as long as all income is declared correctly. If this is neglected, the right to a refund is forfeited.
The Federal Court has recently shown great strictness in this matter by consistently ruling in favor of the tax authorities. According to a recent judgment, for example, a married couple did not get back a tax amount of 45,500 Fr. because in their tax declaration they declared their participation in a company, but accidentally omitted to mention the dividend income from it.
Negligence should no longer be punished
Criticism from politics and business has now prompted the Federal Council to relax these regulations. According to its message, withholding tax should also be refunded if the declaration of income was negligently omitted. This is achieved by relaxing the requirements for a proper declaration. In future, incomes that were not declared through negligence can also be reported retrospectively; either spontaneously or upon request or offset by the tax authorities. However, this must be done before the deadline for filing an objection to the assessment expires. Thus, double taxation of withholding and income tax is to affect only cases of attempted tax evasion and no longer apply to negligence. After the implementation of the proposal, a reduction in tax revenue is expected, as withholding tax will be refunded more frequently.
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