What is a tax ruling?

A tax ruling is a preliminary decision in which the tax authorities comment on a particular situation. To prevent criminal consequences, individuals and companies can obtain the assessment of the competent authorities on a tax issue in advance.

Almost every decision made by individuals or companies has tax consequences. However, tax law does not regulate each of these situations but is designed to be open and flexible. This leads to uncertainty about how the tax authorities will decide until the tax laws are actually applied to a specific situation. Uncertainties and ambiguities are the result. To counteract this problem, Swiss tax law knows the instrument of tax rulings.

What is a tax ruling?

A tax ruling, or preliminary decision, is an advance and binding information provided by the tax authorities. For example, if a company does not know whether it has to tax a certain asset, it asks the competent authority before submitting the tax declaration. If the authority denies the tax liability, the company faces no consequences if the tax is not paid, even if it later turns out that the information was incorrect. The purpose of the tax ruling is to create legal certainty.

Requirements for the tax ruling

However, the matter is not that simple. For the tax ruling to be valid, certain conditions must be met. The taxpayer concerned and the tax authorities are bound by tax laws and regulations. Additionally, the taxpayer must present the situation for which he wants information in a detailed and truthful manner. The tax authority, in turn, must name the taxpayer in its preliminary decision and comprehensively justify the situation, the legal classification, and their decision. It is advisable for companies to have the inquiry made by a tax expert or specialist lawyer so that the ruling cannot be discarded later on the basis of inadequate presentation of the facts.

Binding nature of the tax ruling

The binding nature of the ruling is to be assessed according to Art. 5 para. 3 of the Federal Constitution, which means it must comply with the principle of good faith. While a ruling is generally considered binding, this is only the case if the accuracy of the information was unconditionally assured and the inaccuracy was not recognizable to the recipient. Additionally, the ruling provides no protection if there are changes to the applicable legal norms after the preliminary decision.

Conclusion

The tax ruling is a legal construct that facilitates communication between taxpayers and the tax authorities and creates legal certainty. Through simplified exchange, timely and appropriate solutions can be found. However, caution is advised even with a tax ruling. In case of doubt, it is advisable to consult a tax expert to prevent financial and criminal consequences.

Findea helps you keep your taxes simple and unproblematic.