Post-declaration: Tax offense or penalty-free voluntary disclosure

The penalty-free self-disclosure is somewhat like the get-out-of-jail-free card in Monopoly. After all, it allows you to escape punishment once for a declaration error in the tax return.

Filling out the tax return is in many ways like a guessing game. It is not always clear whether something needs to be declared. Precisely for this reason, it can easily happen that one realizes too late that something has been forgotten on the tax return. If even an unused account, an old gold Vreneli, or a newly acquired crypto token is omitted, it's already happened: a declaration error.

Minor discrepancies initially without consequences

As long as the error is not apparent to the tax authorities, they will base the tax assessment on the information in the tax return. If the taxpayer realizes their oversight only after the final assessment by the tax authority, they consequently must make a subsequent declaration. Generally, this simply involves sending a letter along with the necessary documents to the tax authorities, in which the declaration error is described and corrected. Although procedurally simple, a subsequent declaration is inconvenient for the taxpayer as it not only leads to a re-examination of the tax returns of previous years but also has financial consequences.

Retroactive taxes and penalties loom

If a new assessment is justified based on new facts or evidence, which were not known to the tax authority at the time of the original assessment, or if a legally binding assessment is incomplete, retroactive taxes must be paid. Whether the taxpayer is at fault does not matter. The tax is demanded by the tax authorities along with interest for late payment. Due to the statute of limitations, however, retroactive taxation is only possible for the last ten years from the point of subsequent declaration. If the taxation is too low due to a declaration error, the taxpayer is typically also guilty of tax evasion. This is punished with a fine amounting to the evaded tax. Depending on the severity of the fault, the penalty can be reduced to a third of the amount or increased to up to three times the amount.

Penalty-free self-disclosure as a way out

Because declaration errors can happen quickly and do not always have criminal intentions behind them, the legislature has created the option of one-time penalty-free self-disclosure. If the taxpayer self-discloses their oversight for the first time, prosecution will be waived if the tax evasion is not yet known to the tax authority, the taxpayer supports the administration unreservedly in determining the retroactive tax, and makes a serious effort to pay the owed retroactive tax. Completely penalty-free is only the first notification. For each subsequent self-disclosure, the fine is reduced to one fifth of the evaded tax.

Get-out-of-jail-free card must be used carefully

When a subsequent declaration is made, the responsible cantonal authority checks whether retroactive taxes are actually incurred as a result of the declaration. If this is not the case, for example because the subsequently declared assets fall below the exemption limit or the amount of the evaded tax is only a few francs, then the notification will not be considered the one-time penalty-free self-disclosure. However, if a significant declaration error is present, the cantonal tax authority transfers the claim for the first-time penalty-free self-disclosure to the Federal Tax Administration for nationwide registration. This is done to prevent a taxpayer from benefiting from a penalty-free self-disclosure again after moving.

Conclusion

In a figurative sense, the penalty-free self-disclosure is akin to the get-out-of-jail-free card in Monopoly. It is a one-time chance to escape a penalty and should therefore be used with care. If a declaration error does not actually result in evaded taxes or if the amount of the evaded tax is below the cantonal thresholds, the subsequent declaration does not have to be made in the form of a penalty-free self-disclosure.

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