What is the relevant legislation relating to tax administration and controversies? Other than legislation, are there other binding rules for taxpayers and the tax authority?
Legislation governing tax administration (including non-judicial tax-assessment procedures) as well as material tax law is based on the Swiss Federal Constitution, the relevant Swiss federal laws (eg, with regard to (i) income and corporate income taxes, the Federal Direct Tax Act (DBG); (ii) withholding taxes, the Federal Act on Withholding Taxes (VStG); (iii) securities issue and transfer taxes, the Federal Act on Stamp Duties (StG); and (iv) value added tax, the Federal Act on Value Added Tax (MWSTG)) and cantonal legislation (eg, with regard to cantonal income and corporate income taxes, wealth taxes, inheritance and gift taxes, real estate capital gains taxes and property transfer taxes). Further legislation relating to tax administration matters can be found in federal, cantonal and communal ordinances and, in practice, the federal and cantonal judicial authorities' and federal and cantonal tax authorities' published practice (eg, Federal Tax Administration's circular letters, Federal Tax Conference's publications, cantonal guidelines).
Legislation governing tax controversies, including non-judicial tax objection procedures, is based on the legal foundations as set out above. The legislation for judicial (appeal) proceedings can be found in the Swiss Federal Constitution and the relevant Swiss federal procedural laws (eg, the Federal Act on Administrative Procedure (VwVG), the Federal Act on the Federal Administrative Court (VGG) and the Federal Act on the Federal Supreme Court (BGG)), as well as the cantonal procedural laws.
The following questionnaire mainly focuses on income, wealth, corporate income and capital taxes governed by the DBG unless otherwise mentioned.
What is the relevant tax authority and how is it organised?
The administration of taxation in Switzerland is divided between the Federal Tax Administration, the 26 cantonal tax administrations and the communal tax authorities. Social security contributions are administrated by separate, typically cantonal, authorities.
The cantonal tax administrations are responsible for the correct and uniform assessment and the collection of the taxes for the federal government, cantons and municipalities. In addition, they carry out the federal and cantonal tax laws. Real estate capital gains taxes, property transfer taxes, and inheritance and gift taxes, as well as certain fees, are levied only at the cantonal level and, depending on the applicable cantonal legislation, at the communal level.
The Federal Tax Administration is, in addition to certain political functions and its coordinatory functions with regard to other states in the context of double taxation and information exchange, responsible, for example, for value added tax (VAT), withholding taxation, federal stamp duties and the military service exemption tax, and has supervisory duties with regard to the application of the DBG and the StHG. Customs duties are administered by the Federal Customs Administration.
Compliance with tax laws
How does the tax authority verify compliance with the tax laws and ensure timely payment of taxes? What is the typical procedure for the tax authority to review a tax return and how long does the review last?
Federal, cantonal and communal income and corporate income as well as cantonal and communal wealth and capital taxes are levied in a mixed-assessment procedure. That is, taxpayers declare the taxable objects themselves based on their qualification and assessment of the relevant taxable (and tax-exempt) factors, and the tax authorities subsequently verify the information submitted in the individual's or entity's tax return form (ie, compliance with the tax laws and practice) and determine the amount of tax in the assessment decision. The tax authorities' review of submitted forms is, particularly for entities, supplemented by recurring and non-recurring (ie, extraordinary) audits performed by the tax authorities or a mandated service provider on-site.
Cantons invoice the cantonal and municipal taxes as well as the federal income and corporate income taxes usually in several provisional instalments. The due date for cantonal and communal taxes is determined by the respective cantonal legislation. The due date for direct federal taxes is generally 1 March of the year following the tax year. In case of late payment, interest for late payment will accrue.
If taxes are not paid, the taxpayer is first reminded to pay the outstanding amounts. If the reminder is unsuccessful, debt-enforcement measures may be undertaken by the tax authorities.
In a typical procedure, after submission of the tax return, the tax return is reviewed preliminarily to verify its timely submission, the existence of the required signatures and completeness. The tax return is recorded in the electronic assessment system and, subsequently, its content is verified. If necessary, the tax authority may undertake further investigations, whereby the authorities determine on a case-by-case basis which information is required for correct and complete taxation. If the information provided by the taxpayer is deemed incomplete, the authorities may request information from the taxpayer and from third parties (eg, employers). If such further investigations do not lead to satisfactory results, the tax authorities take a discretionary assessment by deciding unilaterally on the taxable income, profits, wealth and capital. The tax authorities' assessment is brought to the taxpayer's attention by way of a formally issued tax assessment order including the applicable taxable income, profits, wealth and capital as well as specifying the available legal remedies.
The duration of a tax return's review differs depending on the authorities' internal organisation and workload. A duration of two to three years for more complex cases may not be excluded; in principle, the tax authorities are only bound by the limitation periods.
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