As March ends, the annual obligation to file a tax return approaches—a process many find challenging. What counts as taxable income? Which items can be deducted? What are the consequences of discrepancies in the information provided?
In Switzerland, all adults, i.e., those aged 18 and over, must submit a tax return if they have a permanent residence or usual abode in the country or own property. This also applies to trainees, students, and apprentices, even if their income is low or non-existent.
The situation is different for foreign workers without a permanent residence permit (Permit C). They pay a withholding tax on their employment income and similar earnings. Only if their gross annual income exceeds CHF 120,000 are they required to file a tax return, which is referred to as subsequent ordinary assessment.
Submission deadlines for the tax return The deadline for filing the tax return ends in most cantons on March 31 of the following year. However, an extension until the end of November or December is often possible.
Consequences of late submission If the submission deadline is missed, a reminder is usually issued, and late fees may apply. However, the handling varies from canton to canton.
Fundamentals of filling out the tax return
Mastering the tax return begins with methodical preparation. First, gather all the necessary documents.
Necessary documents for your tax return For a complete and correct filling out of your tax return, you need various documents related to your income and assets, including:
- Pay slips
- Pension receipts
- Accounting records (for the self-employed)
- Bank statements
- Securities receipts
- Documents for possible deductions include:
- Evidence of medical expenses
- Receipts for contributions to pillar 3a
- Proof of work-related expenses
- Donation receipts
- Costs for further education or retraining
- For owners: all receipts for property tax, interest on debt, administrative costs, and invoices for maintenance and renovation work.
Document Retention It is advisable to keep banking and general tax documents for at least ten years, even though there is no legal obligation to do so. This ensures that they are available for presentation upon request during the final tax assessment or audits. Documents related to real estate should be kept for at least twenty years, especially to provide all necessary proof of investments in case of a sale.
Guide to Filling Out the Tax Return: Correctly Declaring Income and Assets
When filing your tax return, it is mandatory to accurately specify both your income and your assets.
Income Reporting in Your Tax Return Your total income comprises various sources, including:
- Capital gains
- Income from non-self-employed work
- Income from self-employment
- Potential additional income
Enter the net salary as shown on your pay slip into the appropriate line of your tax return. Supplement this with details about other types of income such as alimony, gambling winnings, and other additional incomes. Pensioners must also declare benefits such as AHV (old age and survivors’ insurance) and pension fund contributions.
Deductions from Your Income To determine your taxable income, deduct various expenses, such as:
- Travel expenses to work
- Costs for meals outside the home
- Private interest expenses
- Health costs
- Social deductions, including child and AHV deductions
Asset Declaration in the Tax Return Furthermore, various assets must be declared, including:
- Real estate
- Cash and precious metals
- Securities
- Account balances
- Life and pension insurance policies
Your taxable assets are calculated by deducting debts, such as mortgages or personal loans, from your total assets. Depending on the canton, you may claim additional social deductions and take advantage of tax allowances, which can vary in amount.
Submitting Your Tax Return: A Simple Guide
Submission Process Your tax return will be provided by the responsible cantonal tax administration. You have the option to submit it there, fill it out electronically, or directly online.
Support for Filling Out the Tax Return If you need assistance, you can have your tax return processed by a tax advisor. For specific concerns, your cantonal tax administration is also a helpful resource. Additionally, various online tools are available to facilitate the filling process.
Requesting an Extension You can apply for an extension of the submission deadline through a formal request. The procedure varies from canton to canton, with many cantons preferring online extension via their websites or by scanning a QR code on the tax form. Details can be found in an information sheet or directly on the websites of the cantonal tax administrations.
Consequences of Non-Submission If you fail to submit your tax return despite reminders, an official assessment will be made by the tax administration. In such cases, a penalty for non-compliance with procedural obligations may also be imposed.
Non-Payment of Tax Debt If the tax amount is not paid, enforcement proceedings will be initiated. It is important to note that the tax assessment legally serves as a definitive title for debt collection.
Signature Requirements for Your Tax Return
Personal Signature Required Legal regulations require that each tax return be filled out and signed personally by the taxpayer. Authorization for signing by a third party is generally not allowed. An exception is made in cases where an individual is unable to sign personally due to physical limitations, such as serious illness or accidents.
Exceptions for Incapacity or Guardianship If the taxpayer is incapacitated, under guardianship, or has legal supervision, the legal representative or guardian must sign the tax return on their behalf.
Signatures for Joint Assessment For married couples who are jointly assessed, it is necessary that both spouses personally sign the tax return.
Consequences of Missing Signature If the tax return is submitted without the required personal signature, it is formally considered incomplete. The taxpayer will then be asked to provide the signature within a reasonable period. If the signature is still not provided despite reminders, penalties for non-compliance with procedural obligations may be imposed.
Tax Deductions for Income from Rented Properties
Allowable Deductions for Rental Income If you own a rented property, tax laws allow you to deduct various expenses from your rental income. These deductible costs include:
- Ongoing maintenance costs
- Insurance premiums, including fire, elemental damage, water damage, glass, and liability insurances
- Administrative expenses incurred by external service providers
- Investments aimed at energy efficiency and environmental protection are also considered deductible maintenance costs.
Flat Rate Deductions and Actual Costs Taxpayers have the option to choose between a flat rate deduction and deducting actual costs. The flat rate deduction typically amounts to 10 percent of the rental income or the rental value for buildings that are no more than ten years old. For older buildings, over ten years old at the start of the tax year, the flat rate deduction can be 20 percent.
Distinction from Value-Enhancing Investments It is important to note that expenses which substantially increase the property’s value and improve its condition are not deductible as maintenance costs. Such value-enhancing investments must be considered separately in the tax return.
Risks of Tax Evasion Ensure you declare your taxes correctly, as significant penalties threaten tax evasion. These can amount to up to 100 percent of the evaded sum and may triple depending on whether your actions were intentional or negligent. In cases of tax fraud, financial penalties or prison sentences of up to three years are possible.
Avoiding Common Mistakes in Tax Returns It is crucial to prepare your tax return accurately and error-free, as even minor mistakes can lead to legal consequences. Common mistakes include:
- Undeclared income or secondary earnings
- Unregistered domestic help
- Incorrect use of living spaces, such as declaring a study as a guest room
- Rounded mileage claims for commuting
- Undeclared gambling winnings, although winnings from Swiss casinos are tax-free, they must still be reported.
FAQs on Tax Returns In this section, we answer further frequently asked questions about filling out tax returns.
Are dental treatment costs deductible? Costs for dental treatments not covered by your insurance can be claimed as sickness and accident costs. However, there is a deductible of 5 percent of your taxable income.
Tax-Free Income for Pensioners For retirees in Switzerland, there is no special tax-free allowance for earned income as provided by the AHV with an allowance of CHF 1,400 per month or CHF 16,800 per year. All income in retirement must be taxed regularly.
Declaration of the 3rd Pillar Pension Plan The tax treatment of your pension plan in the 3rd pillar depends on whether it is a pillar 3a or 3b plan:
- Pillar 3a: Contributions to this pension pillar can be deducted from your taxable income up to the legally specified maximum amount each year. The accumulated capital and earnings are exempt from wealth tax during the accumulation phase and grow tax-free.
- Pillar 3b: The tax treatment varies depending on the type of insurance policy (redeemable insurances, pure risk insurances, or mixed policies). Contributions to redeemable capital insurances are not deductible, and the redemption value is counted towards the assets during the term. However, the entire capital including earnings is tax-free upon disbursement.
The Federal Tax Administration provides an annual overview to assist in declaring these pension products in the tax return.
Obligation to Report Foreign Bank Accounts
According to Swiss tax laws, you must declare all worldwide income and assets, including foreign bank accounts, in your tax return, regardless of their balance. This includes accounts with a zero balance. Due to the Automatic Exchange of Information (AIE) between tax authorities, it is particularly important to make complete disclosures. The AIE ensures that foreign bank accounts and life insurances are automatically reported to the Swiss Tax Administration, making the disclosure of all accounts even more critical.
Closing Words and Invitation to Use Our Services
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