Tax Criminal Law in Switzerland: Back Taxes

After explaining the differences between tax evasion and fraud in Switzerland in our last article on tax criminal law, today we will show you what back taxes are and what conditions are necessary for a back-tax procedure to be initiated.

When can a back-tax procedure be initiated?

‍The back-tax procedure is an administrative procedure, the purpose of which is simple. Back taxes are demanded in order to belatedly collect missed tax revenues. They must be paid in addition to a fine or a prison sentence. The amount to be paid corresponds to the amount of the evaded taxes plus a default interest. Back taxes are mostly demanded following an incidence of tax evasion or fraud. According to Art. 152 Abs. 2 of the Federal Tax Law (DBG), the back-tax procedure is initiated simultaneously with the opening of criminal proceedings for tax evasion or offenses. However, there is also a back-tax procedure independent of tax criminal proceedings, the requirements of which are described in Art. 151 DBG. Back taxes can also be collected if the assessment of a taxable person wrongly failed to occur or if a legally binding assessment is incomplete because the relevant tax authority was unaware of facts or evidence at the time of issuing the assessment order or decision on appeal, or if a crime or offense influenced the activity of the tax authority. Unlike tax offenses such as tax evasion or fraud, no fault of the taxpayer is needed here.

The back-tax procedure will be initiated on the heirs if the taxpayer dies and a back-tax procedure had not yet been initiated or could not have been completed. However, they can request a simplified back-taxation if the evasion was unknown, they fully support the tax authorities in the determination of the evaded assets and income elements, and they seriously strive to pay the back taxes owed. In this case, back taxes are only collected for the last three years before the death of the deceased tax evader.

‍How long can back taxes be demanded?

‍The tax authorities can initiate a back-tax procedure ten years after the expiration of the tax period for which an assessment wrongly failed to occur or a legally binding assessment is incomplete. Thereafter, the right expires. To determine the amount of the back taxes, the law gives them an additional five years. No back taxes, however, have to be paid if the taxpayer has correctly and fully declared their income and assets, but the tax authorities made a mistake, resulting in the assessment being too low.

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