Rulings, administration and tax criminal law

The ruling practice

Swiss tax authorities have long been willing to confirm in advance how a planned transaction will be treated. Such an advance ruling, called Steuervorbescheid in Zurich, is not regulated in detail by statute. Its binding force derives from the constitutional principle of good faith, which protects a taxpayer who relied on an assurance given by a competent authority on the basis of a complete and accurate description of the facts.¹ The Cantonal Tax Office describes the requirements for a request in a practice note and on its website. A request must identify the taxpayer, present the facts completely and systematically, contain the applicant’s own legal assessment and formulate the specific treatment for which confirmation is sought. Requests are addressed to the section responsible for the last assessment, to the special sections for securities and for inheritance and gift tax, or, for the real estate gains tax, to the communal tax office.²

In the era of the special regimes, rulings were the everyday instrument with which cantons agreed the treatment of mixed and domiciliary companies, principal structures and financing arrangements with international groups. Their confidentiality became one of the main points of international criticism, especially after the publication of Luxembourg rulings in 2014. Switzerland responded by joining the international standard on the spontaneous exchange of information on rulings developed under Action 5 of the OECD project on base erosion and profit shifting. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters entered into force for Switzerland on 1 January 2017. Since 1 January 2018 Switzerland has spontaneously exchanged information on rulings that entail a risk of profit reduction or profit shifting, on the basis of Arts. 22a ff. of the Federal Act on International Administrative Assistance in Tax Matters and Arts. 8 to 14 of the implementing ordinance.³ In practice the cantonal tax offices report the relevant rulings to the Federal Tax Administration, which transmits the information to the states concerned.

Rulings remain important in Zurich practice today, although their content has changed. The typical requests concern restructurings, the application of the participation deduction, the patent box and the research deduction, the deduction for self-financing, the tax treatment of employee participation plans, the qualification of investment structures and the treatment of trusts and foundations. For asset managers and family offices the ruling often confirms that a Swiss management company is remunerated at arm’s length or that a foreign investment vehicle is not effectively managed from Zurich. Such confirmations do not bind foreign tax authorities, which may in any case learn of them through the spontaneous exchange.

Tax evasion, tax fraud and voluntary disclosure

Swiss tax criminal law distinguishes sharply between tax evasion and tax fraud. Tax evasion is committed by a taxpayer who, intentionally or negligently, causes an assessment to be omitted wrongly or to remain incomplete. It is an administrative offence punished by a fine. Under Art. 175 para. 2 DBG the fine as a rule equals the amount of tax evaded. It can be reduced to one third in cases of minor fault and increased to three times the tax in cases of serious fault.⁴ The Zurich tax law contains corresponding provisions for the cantonal and communal taxes, as the StHG requires. Tax fraud is committed by a person who uses forged, falsified or untrue documents such as business accounts, balance sheets or salary certificates to deceive the tax authority. Under Art. 186 DBG it is a criminal offence punished by imprisonment of up to three years or a monetary penalty. The cantonal criminal authorities prosecute it in addition to the procedure for evasion.⁵

The distinction had great importance for the financial centre. As long as simple tax evasion was not a criminal offence, Swiss banks could accept undeclared funds from Swiss residents without committing an offence themselves, and banking secrecy protected the information from the tax authorities in the evasion procedure. The chapters on the twentieth century and on the big banks have described how international pressure ended banking secrecy for foreign clients. The same distinction also shaped the scope of international administrative assistance, which Switzerland long granted only in cases of tax fraud. For serious tax offences, which include repeated evasion of large amounts of tax and tax fraud, the head of the Federal Department of Finance may authorise the Federal Tax Administration to conduct a special investigation under Art. 190 DBG. The Federal Tax Administration then has the investigative powers of administrative criminal law, including searches and seizures.⁶

A taxpayer who reports his own evasion for the first time is exempt from punishment if the authorities did not yet know of the evasion, if he cooperates without reservation in establishing the back taxes and if he makes a serious effort to pay them. This is laid down in Art. 175 para. 3 DBG.⁷ The rule was introduced with effect from 1 January 2010, in the same years in which the pressure on Swiss banking secrecy grew. Zurich experienced its effect immediately. In 2010 about 1,400 taxpayers filed voluntary disclosures, four times as many as in earlier years. They revealed 666 million francs of previously undeclared assets and produced back taxes of about 60 million francs for the canton and the communes and about 15 million francs for the Confederation, some ten times the amounts of earlier years.⁸ In the following years banks began to demand proof of tax compliance from their clients, while the automatic exchange of information with foreign states made undeclared foreign accounts of Swiss residents visible to the tax authorities, as described in Part G.

For individual taxpayers, the difference between evasion and fraud remains significant today. An evasion procedure in Zurich ends with back taxes, interest and a fine determined by the Cantonal Tax Office. A fraud procedure brings in the public prosecutor, creates a criminal record and may lead to imprisonment. For advisers the most important consequence is that incorrect documents, such as understated salary certificates or fictitious invoices, turn a tax dispute into a criminal case. The domestic distinction between evasion and fraud also still plays a role in the law on money laundering. Since 2016 a qualified tax offence counts as a predicate offence to money laundering, a subject treated in Part I.⁹

Notes

1. Art. 9 BV (protection against arbitrariness and of good faith), bilingual edition, https://www.droit-bilingue.ch/de-fr/1/10/101-9-13.html. According to the case law of the Federal Supreme Court an advance ruling binds the authority if it was given by the competent authority without reservation, on the basis of a complete presentation of the facts, if the taxpayer made dispositions in reliance on it that cannot be reversed without disadvantage, and if the law has not changed in the meantime. ↩
2. Kanton Zürich, Kantonales Steueramt, “Steuervorbescheid beantragen”, https://www.zh.ch/de/steuern-finanzen/steuern/steuern-juristische-personen/steuerwissen-juristische-personen/steuervorbescheid-beantragen.html; see also Zürcher Steuerbuch no. 106.2, “Merkblatt des kantonalen Steueramtes betreffend Begehren um amtliche Auskünfte und Vorbescheide”, https://www.zh.ch/de/steuern-finanzen/steuern/treuhaender/steuerbuch/steuerbuch-definition/zstb-106-2.html. ↩
3. ESTV, “Spontaner Informationsaustausch SIA”, https://www.estv.admin.ch/de/spontaner-informationsaustausch-sia. The exchange takes place only with states that are parties to the Convention. ↩
4. Art. 175 DBG, text reproduced by swissrights.ch, “Art. 175 DBG”, https://www.swissrights.ch/gesetze/Artikel-175-DBG-2025-DE.php. ↩
5. ESTV, “Glossar Steuerstrafrecht”, https://www.estv.admin.ch/estv/de/home/die-estv/steuerstatistiken-estv/kennzahlen/kennzahlen-asu/glossar-asu.html. ↩
6. ESTV, “Glossar Steuerstrafrecht”, cited above. ↩
7. Art. 175 para. 3 DBG, swissrights.ch, cited above. ↩
8. Kanton Zürich, Finanzdirektion, media release of 7 January 2011, cited above. ↩
9. Art. 305bis para. 1bis of the Swiss Criminal Code, in force since 1 January 2016 (AS 2015 1389): an aggravated tax misdemeanour is an offence under Article 186 DBG or Article 59(1) clause one StHG where the tax evaded exceeds CHF 300,000 per tax period, https://droit-bilingue.ch/en-de/3/31/311.0-305bis-372.html. ↩

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.