revised 5 June 2025
by Eilidh Norman
Client Relationship Manager & Financial Planner
Filing a Swiss tax return requires the taxpayer to declare all elements of their worldwide income and worldwide wealth. From a Swiss tax perspective this requires an understanding of how income and wealth are defined and taxed. Whilst income tax will be a familiar concept to most people, wealth tax or how it is assessed is not as common. For wealth tax purposes, taxpayers are required to declare their net wealth position as of December 31st each year to the cantonal tax authorities via their tax return (essentially declaring a personal balance sheet as at the year-end). This means declaring the current value of their assets (everything from worldwide real estate, bank accounts, cars, cash surrender value of life insurance policies etc.) against which can be deducted the current value of their liabilities (such as personal debt, outstanding mortgage balances etc.).
Under Switzerland’s self-assessment tax system, the taxpayer is responsible for ensuring they make a complete and accurate representation of their financial position via their Swiss tax return. However, being human, the taxpayer is not immune to error and what may be considered a small issue or “minor” omission can cause a headache or worse if not addressed correctly.
Unfamiliarity with the system can lead to mistakes or misunderstandings especially between foreigners to Switzerland and the Swiss tax offices. Someone attempting the filing on their own, for example, might not appreciate that they are required to report worldwide income and wealth in Switzerland, or assume that the cash surrender value of their life insurance policy does not need to be considered for wealth tax purposes. Taxpayers may be unsure whether they need to report their US retirement accounts (401k, Traditional or Roth IRA’s) for wealth tax. Foreign and Swiss retirement accounts are generally not reportable for income / wealth tax purposes, but not always…a Roth IRA from the US is generally considered a taxable account in Switzerland and so is a 529 Account (education funding), but why, how are you supposed to know? Being the beneficiary of a trust is another area that can cause confusion for tax reporting too. It’s not too difficult to imagine situations where errors or omissions might arise.
Once the tax return has been filed for the year, if the cantonal tax authorities don’t notice an error/omission on their review, they cannot make the necessary corrections. This will have one of two consequences for the taxpayer; they could either miss out on a potential tax refund or “avoid” the requirement to pay additional tax arrears (with potential penalties). The latter does not mean the taxpayer is in the clear…
What is important in mitigating against the consequences of an error or omission is timing (which is critical) and transparency. Take prompt action and collaborate with the authorities in a timely, transparent manner. It is generally more favourable to voluntarily correct an error than to be asked to do so by a Swiss tax office.
So, what do you do when you realise something is wrong with your Swiss return? The first thing to do is not to panic. The second is do something about it!
The local cantonal tax authorities are generally very pragmatic. If an account has been forgotten but was previously declared, the authorities will usually pick this up and send an information request to the taxpayer to request the necessary information. This process forms part of the authority’s regular annual checks and reviews of a return. Once they have the necessary information, they adjust the return accordingly and issue the final tax assessment to the taxpayer. They would also not expect to see the same error/omission in subsequent returns and if it does happen, they are not necessarily quite as understanding second time around.
Where an error/omission is something that has not previously been declared at all, for example an overseas account that has been forgotten and never declared, then the authorities’ reaction often depends on the fiscal impact the account omission has (and has had on prior years). If significant, they are likely to want to adjust tax filings retroactively with the taxpayer being required to settle the additional back taxes and interest. Alternatively, if the impact is immaterial, as mentioned above they may decide to simply adjust the current year tax assessment. In more serious cases, however, an error or omission can result in penalties, allegations of fraud or tax evasion. It is therefore important to be pro-active and transparent and declare errors/omissions to the authorities rather than wait for them to start looking into your affairs.
At White Lighthouse we have also had many clients have questions asked about their wealth declaration, when in fact they reported everything correctly. Most of these cases have happened when investment returns were very high in a given year. Tax preparers and the tax
offices are often comparing the change in value from one year to the next and are trying to ensure money from an undeclared account does not make its way into an account that was declared. When the change in value due to investment returns is the reason, taxpayers may be asked to provide all the monthly statements of the account for the entire year. Questions can also arise when taxpayers are moving assets from one account to another in a given tax year, so keeping good records is essential as a human is looking at every tax return filed, unlike the United States where most returns are “audited” by computer.
If the authorities have not yet issued the final tax assessment for the year, then often a simple letter or call to the cantonal tax office to explain and provide the additional documentation will suffice. The authorities will normally adjust the return and issue the final tax assessment based on the corrected data. In more complex cases, a rectified tax return may need to be filed, superseding the original.
Once a tax assessment has been issued, the taxpayer has a further 30 days from the date of the assessment to check it and make any necessary corrections. An “objection” to the tax assessment must be made in writing and signed by the taxpayer. If the “objection” is rejected by the authorities the taxpayer has the right to appeal the decision within 30 days by applying in writing to the competent cantonal court. This starts to become expensive, and if the taxpayer is defeated in the cantonal court, they also have to bear the costs.
Forgetting to declare an account for tax purposes in Switzerland can have serious consequences. Tax evasion is taken very seriously by the Swiss tax authorities and undeclared assets can lead to financial penalties, back taxes and possible legal action. This may further impact things such as permit renewal or the application for Swiss naturalization. In addition, with the (not so new now) Automatic Exchange of Information (AEI) between authorities and international tax agencies, account details are reported by banks to the tax authorities in most countries so it’s more likely that an undeclared account may be flagged. Consequently, it’s even more important than ever to review and find any account(s) you may have omitted. It should be noted however that the United States has not yet signed up to AEI.
Should you find yourself in the position that you need to declare an omission to the authorities, voluntary disclosure may be an option. Swiss tax law allows taxpayers to report undeclared assets without penalties for the first-time disclosure, provided the taxpayer cooperates fully and the authorities have not already discovered the omission. Voluntary disclosure is possible retroactively for up to 10 years regardless of whether the information was omitted intentionally or unintentionally. Links to some of the cantonal tax websites for additional information and their respective processes can be found at the end of this article.
A tax assessment will be issued for all of the years concerned under the voluntary disclosure and the taxpayer will have to settle the tax arrears and interest. The “benefit” of the voluntary disclosure process is that the high fines that are associated with tax evasion are avoided.
Switzerland has Federal taxes (applicable across the whole country) and Cantonal and Communal taxes based on each canton’s own tax law and tax rates. Swiss tax returns are filed at the cantonal level for both Federal and Cantonal/Communal tax purposes. So, while all tax advisors should have the same understanding of the Federal tax system, a local tax advisor in Geneva is not necessarily going to be familiar with all the local cantonal/communal tax rules in Bern or Zurich for example. A good local tax advisor with a wide variety of clients is likely to also be in regular contact with the local tax authorities, be familiar with local tax rulings for organisations located in the canton and understand the best ways (and who) to approach at the authorities to discuss the various tax issues that arise.
Local i.e. cantonal expertise is generally beneficial and shouldn’t be underestimated. Do your homework to find someone you are comfortable working with and trust. If you are a foreigner in Switzerland, it may be better to work with a Swiss tax preparer that works with many other foreigners and has some familiarity with your country(ies) of prior residency or where you currently hold assets outside of Switzerland. They should be able to guide you through the complexities of the Swiss tax system and keep you on the straight and narrow. Your tax preparer is there to ensure accuracy of reporting, that the correct procedures are followed and, if required, they may also be in a position to negotiate with the authorities on your behalf and ultimately to keep you out of trouble.
For many longer-term residents, after a few years of filing a Swiss tax return under their belt and with perhaps an increased proficiency in the local language, they feel reasonably comfortable taking on the task of completing their own tax return and choose to file on their own. For those of you who might be considering taking the plunge, cantonal tax authority websites have a wealth of information and contact numbers (and many also have an English version of their site). You can also file online using the cantonal tax software, you can request filing extensions, instalment adjustments etc.
The local offices are very approachable should you have any questions (especially if you give the local language a try too!) and, fear not, you can usually be passed through to an English-speaking colleague if you haven’t quite conquered the tax lingo yet (but don’t give up!). Once you have mastered the Swiss return you will see that it is nowhere near as complicated as, say, the United States’ tax filing for the usual day to day filing requirements but please, where in doubt, get some professional guidance. Links to the main tax authority websites can be found at the end of this article.
Consult with a tax advisor. Getting professional assistance can be invaluable in a foreign country with an unfamiliar tax regime and helps to minimise the chance of errors.
Act quickly if you notice an error or omission. It is viewed more positively by the tax authorities if you are pro-active and transparent with them.
If you do find an error or omission, work with a tax advisor to understand the rectification process required. Each cantonal tax authority is different and sometimes a simple phone call with the authorities is sufficient to rectify the situation if prompt action is taken. However, if a formal rectification process is required, it needs to be followed correctly.
Put systems in place to avoid making errors in the first place if possible!
Check your financial records thoroughly during preparation
Think about keeping a rolling checklist on file for use each tax season to help prevent against accidental omissions.
Use a tax expert to prepare your return
Check your tax filing thoroughly prior to submission
Check your tax assessments promptly and carefully.
Cantonal Tax Authority websites
Voluntary disclosure info/process (where available)
At White Lighthouse Investment Management, we are both investment management and financial planning professionals. While we do not file tax returns on behalf of our clients, we maintain a close working relationship with many of our clients’ tax advisors and help our clients invest and plan more efficiently. We strongly encourage our clients to maintain tax compliance in all jurisdictions they are required to; however we also encourage them not to pay any more tax than they legally have to. If you are a client of White Lighthouse reading this and would like to discuss the implications for your situation, please reach out to us. If you would like to inquire about working with White Lighthouse, please visit our Contact US page (for US taxpayers resident anywhere in the world) or white-lighthouse.ch/contact-us (for non-Americans in Switzerland).