Taxation in Switzerland - Tax-related Criminal Law

Tax-related Criminal Law

Depending on the nature of the tax at issue, criminal offences related to the nonpayment of taxes are regulated in substantially different ways by cantonal and federal statutes. This section will therefore discuss only the outlines of the harmonised rules governing tax evasion and tax fraud with respect to the federal and cantonal income, profit, property and capital taxes.

It is a criminal offence under cantonal and federal law to wilfully cause one's taxes to be incompletely assessed. The statutes distinguish, however, between tax evasion and tax fraud. Tax evasion is the act of causing a tax to be falsely assessed, such as through the failure to report taxable income. It is classed as a misdemeanour (Übertretung / contravention) and is punishable by a fine of 33% to 300% of the amount of tax evaded. Tax fraud, on the other hand, occurs if a tax evasion is committed by using false documents (such as untrue corporate financial reports) for deceptive purposes. It is classed as a crime (Vergehen / crime) and is punishable by additional imprisonment of up to three years or an additional fine of up to 30,000 CHF.

This distinction is of particular importance with respect to the level of international judicial assistance afforded by Swiss authorities to foreign states that prosecute their own citizens for tax evasions committed in Switzerland, such as by depositing undeclared income with a Swiss bank. Up until recently, Swiss law prohibited all support to foreign jurisdictions for the prosecution of fiscal offences, except to the U.S. under the terms of a 1973 agreement. Since 1983, enforcement assistance is provided (such as the search and seizure of accounts and documents) for the prosecution of fiscal crimes (notably, tax fraud) but not for the prosecution of fiscal misdemeanours (notably, tax evasion). Under pressure from the G20 and the OECD, the Swiss government announced in March 2009 that it will abolish the distinction between tax fraud and tax evasion in dealings with foreign clients. The Swiss authorities will from now on also provide judicial assistance in the event of tax evasion by a foreign client. The distinction remains valid for domestic clients.