Compliance and criminal risk

The fictitious relocation

The most serious risk in the relocation of German taxpayers to Switzerland is the fictitious move. In the typical case, the taxpayer registers his residence in a Swiss commune, rents a small flat there and obtains a Swiss residence permit. In fact his family continues to live in the German house, his children attend German schools and he spends most of his time in Germany. The German tax authorities speak in such cases of a Scheinwohnsitz, a sham domicile. The Swiss registration has no effect on German tax liability if the taxpayer still has a domicile in Germany within the meaning of § 8 AO. Because of Article 4 paragraph 3 of the convention, he then remains subject to German worldwide taxation even if the tie-breaker rule were to favour Switzerland.

German tax investigators have developed practical methods to test the reality of a move. They include the analysis of mobile phone data, credit card transactions and toll records, the questioning of neighbours and the evaluation of utility bills. Switzerland has applied the automatic exchange of financial account information under the OECD Common Reporting Standard since 2017, with the first exchange of data with the member states of the European Union in 2018. Since then the German authorities have also received information about Swiss bank accounts held by persons who are registered as German residents.¹ Article 27 of the convention, in its version of the Protocol of 2010, provides for the exchange of information upon request in accordance with the OECD standard.²

Tax evasion under § 370 AO

If the taxpayer who has moved only in appearance fails to declare his worldwide income in Germany, he commits tax evasion under § 370 AO. The offence carries a term of imprisonment of up to five years or a fine. In especially serious cases, such as the evasion of tax in large amounts, the penalty is imprisonment of six months to ten years. The limitation period for especially serious cases has been extended to fifteen years by the Annual Tax Act 2020.³ The same risk attends the failure to declare income that remains taxable in Germany under Article 4 paragraph 4 of the convention or under § 2 AStG. It also attends the failure to notify the tax office of the events relevant to the exit tax under § 6 paragraph 5 AStG. A voluntary disclosure under § 371 AO remains possible but is subject to strict conditions, including completeness for all tax types and periods and the payment of the evaded tax and interest.

The criminal dimension extends to Switzerland. A taxpayer who declares himself resident in Zurich while living in Germany may also commit a Swiss tax offence if he claims Swiss benefits on that basis. The Swiss authorities may provide administrative assistance to Germany under Article 27 of the convention. The tax data acquired by German authorities from Swiss banks and the voluntary disclosures that followed have shown how exposed German taxpayers with Swiss connections can be. The history of these episodes has been told in the preceding chapter. For the practitioner the lesson is simple. A relocation to Zurich must be real, complete and documented.

Documentation

The documentation of a genuine relocation should include the lease or purchase contract of the Zurich home, the deregistration in Germany, the registration in the Swiss commune and the Swiss residence permit. The school enrolment of the children, the transfer of doctors, clubs and memberships and a calendar recording the days spent in each country belong to it as well. The last of these is often decisive in disputes, because the German tax authorities can reconstruct the taxpayer’s presence in Germany from electronic traces and will question any statement that the calendar does not support. The sale or letting of all German dwellings, or at least their furnishing in a way that excludes use by the taxpayer, completes the picture.

Notes

1. State Secretariat for International Finance (SIF), “Automatic exchange of information (AEOI)”, https://www.sif.admin.ch/en/automatic-exchange-information-aeoi: with the EU, the AEOI is implemented on the basis of a bilateral international treaty, the legal basis entered into force on 1 January 2017 and the first data were exchanged in 2018. Part J of this book describes the regime in detail. ↩
2. Fedlex, SR 0.672.913.62, consolidated version of 27 November 2025, cited above, Article 27, in force in its revised version since 21 December 2011. ↩
3. § 370 paras. 1 and 3 AO, https://lxgesetze.de/ao/370 (“Freiheitsstrafe bis zu fünf Jahren oder … Geldstrafe”, in especially serious cases “Freiheitsstrafe von sechs Monaten bis zu zehn Jahren”). § 376 para. 1 AO, https://lxgesetze.de/ao/376, sets a limitation period of 15 years for the cases listed in § 370 para. 3 sentence 2 nos. 1 to 6 AO. Heuking, “Jahressteuergesetz 2020 in Kraft getreten: Verlängerung der Strafverfolgungsverjährung bei Steuerhinterziehung”, 12 January 2021, https://www.heuking.de/de/news-events/newsletter-fachbeitraege/artikel/jahressteuergesetz-2020-in-kraft-getreten-verlaengerung-der-strafverfolgungsverjaehrung-bei-steuerhinterziehung.html, reports the extension from ten to fifteen years by the Jahressteuergesetz 2020 of 21 December 2020 and notes that an especially serious case may exist where the reduction exceeds 50,000 euros. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.