SWITZERLAND Law and Practice Contributed by: Joseph Merhai, Thomas Pasquier and Laurent Schenker, Aegis
5.5 Role of Tax Authorities and Enforcement Measures In Switzerland, the investigative powers of the authori - ties depend on the procedural framework. A distinc - tion must be made between the ordinary tax assess - ment and audit process, the procedure relating to “tax misdemeanours” (in particular tax evasion), and proceedings concerning tax “offences” (in particular tax fraud). In the ordinary tax assessment procedure, the com - petent cantonal tax authorities and, for certain fed - eral taxes, the FTA may request all information and supporting documentation necessary to determine a correct assessment. The authorities are entitled, after the filing of a tax return, to seek additional explanations, accounting records and documentary evidence. In practice, the FTA regularly conducts audits in VAT, WHT and stamp duties, typically covering prior tax periods. Once an audit is initiated, the taxpayer is required to grant access to books, records and supporting documents. The purpose of an audit is to verify compliance and detect under-reporting. Audit triggers vary, but typical - ly include higher-risk profiles, taxpayers not audited for a longer period, and random selection. In practice, an audit initiated in relation to a specif - ic tax (eg, WHT) that results in back taxes will often prompt the authorities to extend their review and to open further audits covering other taxes. This distinction between administrative and criminal aspects is important because, in practice, they are often conducted in parallel. In proceedings relating to tax misdemeanours, such as tax evasion or breaches of procedural obligations, the same tax administration is generally competent both for the back-tax proce - dure and for setting the fine. This overlap may give rise to procedural tensions, because the taxpayer is under a duty to co-operate in the administrative back- tax procedure, whereas the criminal law procedural guarantee, including the privilege against self-incrim - ination, applies in criminal proceedings. Where the facts suggest a tax offence, such as tax fraud, the matter moves beyond the ordinary admin-
istrative framework. In such cases, the public pros - ecutor is competent for the criminal prosecution, and the proceedings are governed by the Swiss Code of Criminal Procedure. The public prosecutor may use coercive investigative measures where appropriate. In specific cases, the FTA may also order coercive measures under the Federal Act on Administrative Criminal Law, based on a written mandate from the head of the Federal Department of Finance, including: • searches of premises; • seizure of documents/data; • sequestration/freezing of assets; and • questioning of individuals. Accordingly, Swiss tax authorities have broad powers to obtain records and conduct audits in the ordinary assessment context, but searches, raids and com - parable coercive measures are generally reserved for criminal or administrative criminal proceedings and require a specific legal basis and sufficient suspicion of a serious offence. In Switzerland, no separate penalty regime applies solely because a transaction is cross-border. The gen - eral tax penalty framework applies equally to domes - tic and cross-border situations where taxable facts have been omitted, misreported or otherwise handled incorrectly. If taxes have not been properly declared or paid, the competent authority may first open a back-tax proce - dure (see 5.4 Reporting Obligations and Disclosure Regimes ) to recover the unpaid tax. Under Swiss law, back taxes may generally be assessed for up to ten years following the relevant tax period or the entry into force of the original assessment, depending on the tax concerned and the applicable procedural rules. 6. Penalties and Sanctions 6.1 Tax Penalties Where the conduct amounts to tax evasion, whether committed intentionally or negligently, the taxpayer is exposed to a fine. As a rule, the fine is assessed by reference to the amount of tax evaded and typically
471 CHAMBERS.COM
Powered by FlippingBook