I think I am in trouble---voluntary self-disclosure

Finance, Taxes, Banking, Insurance and Retirement
1
I would like to seek some advice and personal experience (if any) here

I am on B-Permit. I have been taxed at source and I did not know about wealth tax in Switzerland, I used to think that I do not have to file tax return.

Now, I am in trouble because I think I had to file tax for 2020 and 2021.

For 2020 and 2021, I owed some wealth tax. For 2020, I realized capital gain in stock market but I most likely fall into the category of "private investor" and hence very little tax on that. However, for 2021, I very likely fall into "professional investor" and hence a lot of tax to be paid.

In the worst scenario, the total owed tax for 2020 and 2021 will be CHF 12,000. Cautiously optimistic amount will be around CHF 7,000.

Until now, I have never been contacted by the tax authority.

I will carry out very soon "first-time voluntary self-disclosure" where I learnt penalty will be waived. However, my prime worry is whether my mistake will cause me to have criminal record (Strafregisterauszug). My understanding is that in Switzerland, tax evasion is contravention, however, given my owed tax is a lot (CHF 7000 minimum), any contravention with a fine > CHF 5,000 will be listed in Strafregisterauszug.....

Any suggestions welcomed.

2
You won't get a criminal record. You neglected to declare.

By the way, you talk about realising capital gains on stocks. Any stocks you own are taxed as an asset - not just when you realise them.

3
No criminal record as long as you declare now. But the whole process can be tiresome.

4
As a next step, contact a tax adviser.

5
1. It's not a big deal esp. if you make a voluntary disclosure. As long as you were not acting fradulently the most likely outcome is that you pay back taxes with interest and no penalties.

2. Are you sure you are a professional investor? If you're in a full time job, it is unlikely that the tax authorities would treat you as one unless you do something stupid and say you are a professional investor.

3. Panicking and saying too much/the wrong thing is likely to cause you more problems than if you stay calm and do the right thing. Here experienced advice from a tax practioner is invaluable.

Don't worry. In the scheme of things, 12k is pretty small beans. I've had to help clients declare in the millions of unpaid taxes.. and some of them were far from squeaky clean...

6
First of all don’t panic, you won’t get a criminal record and lots of people on direct taxes make these kinds of mistake.

As for being a professional investor, it is not decided on a yearly basis, it’s a life style so even if you technically met the rules on one occasion it is likely that the revenue will accept that you are not a professional.

Given the figures involved, it is worth spending a couple of hundred on a good tax advisor to sort it out and give you peace of mind.

7
...because of the pandemic and a very average company accountant I was subcontracting for, 2020 was a real mess for my finances. Although my income was much, much higher that year due to my gains on the stock market and other business success stories I ended up only paying 3,000 more as I have a great accountant.

You really do have to trade a lot to be classed as a pro-investor, I was buying and selling daily at one point but was not penalised.

Phil_MCRs 3) not to panic and say too much is exactly right.

To sum it up, you are NOT in trouble so to speak....my experience here is that it is not like anywhere else, you are given a lot of slack and as long as you are reasonable and pay in the end, the matter will be closed eventually. We learn year by year how to do everything better in Switzerland.

8
Yes, I understand the stock value at the end of the year (31st Dec) is taken into the formula of wealth tax calculation

Yes, I understand tax evasion and tax fraud are different things in Switzerland. And there is no tax fraud at all in my case.

The term "professional" (vs. private) has nothing to do as to the person's employment. It is the "style" of investment in question.

Can you share what is the fate of the your client needing to declare millions at the end? Only fine? or prosecuted and criminal record?

I think there is no penalty for frequent trading (i.e. professional investor), but one just has to pay more taxes.

In 2022, I really traded a lot, like about 50 transactions (one of them being a day trade while many others being swing trade). An idea sudden came to my mind: will this cause issue to my B-Permit (permanent work contract, but closed permit)? I am inclined to believe no impact on my permit because frequent stock trading (one key character for "professional" trading) is not considered as a job, so there should be no breach to work permit condition.

But would like to hear thoughts from you guys.

Many thanks to the replies from you guys. I feel somewhat relieved.

However, I notice there is one thing not yet mentioned, that the "first-time voluntary self-disclosure" has a condition that the tax authority has no knowledge about your tax owing, then the "no-penalty" is justified.

Due to AEOI, I wonder if the tax authority has the data/knowledge already. But one thing that puzzles me is that, until now, the tax authority has never contacted me.

Indeed, it is the criminal record (Strafregisterauszug) I care about most, I am willing and able to pay back taxes with accrued interest.

9
50 transactions in total? Peanuts

50 transactions per day? Different story.

10
Wow, indeed, I used to trade lot less frequently prior to 2022, something like traditional "buy and hold" type investor. However, since the beginning of 2022 (or the very end of 2021) I changed my investment style, just for experiment to see if any improvement in return.

11
suit yourself. pay extra tax voluntarily if you want.

pay back taxes with interest.

12
How many trades are we talking about ( ballpark ) for that amount and how much is the ratio of your capital gains compared to the rest of your income.

In my experience the latter is usually the deciding factor.

13
Thanks for the input. The capital gain is 10-20% of my total income, and yes, the typical threshold of "professional" investor is 50% of total income.

14
Also, once you have (evnetually, with the support of a tax advisor) fixed your tax declarations and get a final account of what is due..... you can ask to pay in installments.

Basically, if you request a reasonable payment plan, and pay as agreed, the tax office will be happy.

15
You'll need to look at all the factors in totality to make a decision. But based on the incomplete information provided, if you were a client of mine, I wouldn't even be thinking about thinking about declaring as taxable.

16
Tax authorities would never be overzealous in labeling people "professional investores", since such people not only pay taxes on capital gains, they also can deduct capital losses. From what are you describing you not even remotely have anything to worry about.

17
It's called self disclosure with impunity (Straflose Selbstanzeige). All you would have to pay is the owed taxes. This is logically not a fine, and hence there will be no criminal record entry.

You have a literal once in a lifetime opportunity for such a self disclosure with impunity. However, this is only with impunity when the authorities do not know about the undisclosed funds/income through other channels.

18
Yes, you are right and this is what I am worried about. I am not sure if the tax authority know about my situation (but I have never been contacted by them)

If they know, then I think the Straflose Selbstanzeige is useless and if the fine exceeds CHF 5000, then I will have criminal record.

19

The amounts you mention are way too low to draw the attention of any prosecutor. A qualified tax offence is considered when 1) over 300K in tax expense is evaded and 2) fake documents are deliberately submitted

https://fbt-avocats.ch/wp-content/up…%A9pendant.pdf

20
Thanks, hope it is what you said. Hope the lucky goddess is with me.