Tax Controversy 2026 Comparisons

In Switzerland, taxes are levied at three levels:

• federal;
• cantonal; and
• municipal.

In addition, the cantons have a high degree of autonomy in tax matters, which results in different handling of tax disputes, even between the different cantons and the Swiss Federal Tax Administration (SFTA).

Tax controversies can arise from a variety of sources, including:

• tax audits;
• tax assessments;
• tax self-assessments or reassessments;
• withholding of tax; and
• other administrative decisions.

The most common types of tax disputes in Switzerland are tax assessments, where the tax authorities review and issue assessments based on their findings, which may differ from the tax return (mostly self-assessment), or tax audits. In cases where the tax authorities identify discrepancies or errors in a taxpayer’s tax returns, this may lead to disputes over the amount of tax owed.

Tax controversies can arise from any type of tax matter. The tax amount at stake fluctuates considerably and is highly dependent on individual cases.

According to SFTA statistics, additional taxes and penalties in criminal tax proceedings exceeded CHF400 million in 2022. These figures include not only direct federal tax, but also cantonal and municipal taxes. As shown by the statistics, revenues from criminal tax proceedings fluctuate significantly over time, with high levels recorded in 2022 and 2023, followed by a marked decline to below CHF100 million in 2024 (latest data available).

However, in 2024, VAT audits conducted by the SFTA increased VAT revenues by CHF205 million. Revenue from withholding tax and stamp duty inspections amounted to about CHF199 million.

Co-operation between the authorities on the one hand and tax advisers or taxpayers on the other works well in Switzerland. For instance, before an assessment takes place, the tax authorities are quite open to discussions with taxpayers, which helps to avoid disputes at an early stage.

In addition, the Swiss tax authorities provide taxpayers with clear guidelines and safe-harbour rules, which helps to ensure that taxpayers are aware of their obligations and can comply with the rules.

One of the most important ways of avoiding tax disputes, however, is through tax rulings. A tax ruling is a binding confirmation from the competent tax authority – at the taxpayer’s request – that the tax consequences expected by the taxpayer regarding a specific issue or transaction are correct. This provides certainty and clarity to the taxpayer before the transaction takes place. The ruling procedure is not regulated by tax law but is based on the constitutional principle of good faith. Obtaining a tax ruling usually takes a few weeks, but, depending on the complexity, the process may take up to several months.

Furthermore, Switzerland has signed more than 100 double taxation treaties (DTTs) to prevent double taxation and ensure co-operation between tax authorities, which helps to reduce the likelihood of disputes between taxpayers and tax authorities in different countries. If the taxpayer and the tax authorities in cross-border disputes cannot reach a common solution, a dispute resolution mechanism is available.

Switzerland has taken steps to implement the Organisation for Economic Co-operation and Development (OECD)’s Base Erosion and Profit Shifting (BEPS) recommendations. The BEPS project aims to combat tax avoidance by multinational enterprises (MNEs) through measures such as country-by-country reporting or transfer pricing rules.

Switzerland has implemented a number of BEPS-related measures, including country-by-country reporting and treaty-related changes. However, Switzerland does not have specific statutory transfer pricing rules. Transfer pricing is primarily based on general tax principles and the arm’s-length standard, interpreted in light of OECD guidance. Furthermore, Switzerland has amended its double tax treaties and domestic legislation in response to the BEPS recommendations and European Union (EU) measures.

In response to increased scrutiny from the EU and other international bodies in recent years, Switzerland has taken these measures due to concerns about tax avoidance and tax evasion. However, the measures taken to implement the BEPS recommendations have also led to some controversy and negotiations between Switzerland and other countries or international bodies, and it remains to be seen how effective they will be in the long term.

Currently, the tax administrations – at cantonal and federal level – seem to focus their attention and scrutiny on offshore structures. As can be seen in practice and recent case law, the tax administration tries – in many cases successfully – to tackle such structures by questioning the place of effective management and/or by applying transfer pricing rules.

In addition, recent international developments, including the introduction of the OECD/G20 minimum taxation rules, are expected to increase further scrutiny of multinational structures and may give rise to additional tax controversies going forward.

In Switzerland, contesting a tax assessment does not automatically suspend the financial consequences associated with the assessment. Depending on the tax and the procedural posture, interest may accrue while the dispute is pending. Taxpayers therefore often consider paying the disputed amount under reservation in order to mitigate late-payment interest. A formal complaint or appeal may nevertheless be lodged independently of payment.

In Switzerland, tax audits are carried out by the SFTA and the cantonal tax authorities. The main purpose of a tax audit is to ensure that taxpayers are complying with their tax obligations and to detect any tax evasion. It is important to note that the criteria for determining a tax audit may vary, depending on the canton and the specific tax authority involved. However, some of the main factors that may trigger a tax audit in Switzerland are high-risk companies, companies that have not been audited for a longer period, and also random selection. Subsequent audits are usually carried out on the basis of certain criteria, such as the size of the company or the type of business.

In practice, tax audits are increasingly risk-based and focus on areas perceived as having a higher potential for non-compliance. Particular attention is given to complex structures, cross-border activities and transactions involving related parties. In the area of indirect taxes, especially VAT, audits are generally conducted more frequently and in a more standardised manner, reflecting the centralised competence of the SFTA.

Duration

The tax authorities in Switzerland may initiate a tax audit at any time and, apart from the general rules on statutes of limitation, there is no specific time limit within which they must do so (however, statutes of limitations have to be observed). The length of a tax audit varies – depending on the complexity of the taxpayer’s affairs – between a couple of days to even years, if the result of the audit is challenged before the courts. Except for VAT audits, there is also no specific time limit within which it must be completed.

Statute of Limitations Rules

Switzerland has statute of limitations rules that limit the period during which the tax authorities can assess and collect taxes. The statute of limitations for corporate and income taxes is generally five years for ordinary assessment, subject to interruption, with an absolute limitation period of ten years; longer periods may apply in the context of back-tax proceedings. For cantonal taxes, the statute of limitations follows harmonised principles within the framework of the Swiss Tax Harmonisation Act (StHG). For withholding tax and stamp duty, the statute of limitations is five years from the end of the relevant tax period. For VAT, the absolute limitation period is ten years. However, the five-year limitation period for withholding tax is not absolute and can theoretically be extended for as long as required if a corresponding interruption is performed. However, a limitation period of seven years must be observed in the case of criminal offences regarding withholding tax.

Although statutes of limitations do not prevent a tax audit from being initiated, they do restrict the period during which the tax authorities can make assessments and collect taxes. Once the limitation period has expired, the tax authorities can no longer assess or collect taxes for that period.

In Switzerland, tax audits can take place either at the tax authority’s headquarters or on the taxpayer’s premises. The choice of location depends on various factors, such as the size and complexity of the taxpayer’s affairs, the amount of information to be reviewed, and the preferences of the taxpayer and the tax authorities.

During a tax audit, tax authorities typically review various types of documents and data to assess the accuracy of the taxpayer’s tax returns. This can include documents such as accounting records, financial statements and invoices, as well as electronic data such as emails and computer files. Taxpayers are by law required to co-operate with the tax authorities and provide access to any relevant documents and data upon request.

In some cases, taxpayers may also be required to provide additional information or explanations to support their tax returns. This can include answering questions about their business activities, providing details about specific transactions, or clarifying any discrepancies found during the audit.

During a tax audit, the tax authorities have a wide range of interests. With regard to corporate income tax, one of the most important aspects for tax auditors is the compliance of the company’s accounts with both accounting and tax regulations. Tax auditors also examine substantive issues relating to the taxpayer’s income, expenses and deductions. This includes assessing whether the taxpayer has calculated its taxable income correctly, whether it has claimed all allowable deductions and credits, and whether it has reported any capital gains or losses properly.

Overall, tax auditors in Switzerland are primarily concerned with ensuring that taxpayers comply with all legal requirements and that their tax returns are accurate and complete.

Switzerland has experienced an increase in the number of tax audits due to the increasing prevalence of rules on cross-border exchange of information and mutual assistance between tax authorities. Switzerland has signed several international agreements, including the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which facilitates the exchange of information between tax authorities. This has led to an increase in the number of tax audits in Switzerland, as the tax authorities are now better equipped to identify potential cases of tax evasion and non-compliance.

The key points to consider from a strategic perspective during a tax audit in Switzerland are the following.

• Preparation – prior to the audit, it is important to review and organise all relevant documents and records. Obviously, in view of a possible tax audit, this should be a recurring task.
• Scope – understanding the scope of the audit and the issues on which the tax authorities will focus will help to identify potential areas of concern and ensure that all relevant information is provided.
• Co-operation – full co-operation with the tax authorities and providing all the requested information in a timely and complete manner can help to build trust and credibility with the tax authorities and may lead to a more favourable outcome.
• Communication – maintain open and transparent communication with the tax authorities throughout the audit process.
• Review – carefully review the results of the audit and seek professional advice, if necessary, to help identify potential problems or areas of concern and ensure that any necessary corrective action is taken.

In addition, the administrative procedure should be used to gather and produce all the documentary evidence that might be needed in the judicial tax proceedings, should they be initiated by the taxpayer. This is due to the fact that the timeframe to lodge appeals is limited (see 4.1 Initiation of Judicial Tax Litigation).

The administrative tax procedure in Switzerland typically starts with the tax authorities informing the taxpayer of their decision to perform an additional tax assessment. Within 30 days of receiving this notice, the taxpayer has the possibility to file a formal complaint with the tax authorities. The competent tax authority is required to re-examine and, if necessary, modify the initial decision partially or in full, or reject the complaint entirely. It should be noted that the same tax commissioners may be involved in the subsequent re-examination of the case, or a different department may handle it. In some cantons, the taxpayer will be notified by the tax administration if it intends to deviate from the tax return. In these cases, the taxpayer may submit a statement before the final decision is taken.

The tax authority may modify the initial decision partially or in full or reject the objection entirely. The outcome of the re-examination decision can be appealed to the competent cantonal or federal court.

For tax assessments that have become final and binding (ie, once the deadline for filing a claim has expired), the taxpayer may challenge them only through extraordinary remedies (eg, revision), which are subject to very limited conditions.

In Switzerland, there is no fixed time limit for tax authorities to respond to an administrative claim lodged by a taxpayer. However, the tax authorities generally respond within a reasonable timeframe. If the tax authorities do not respond within a reasonable timeframe, the taxpayer can lodge a hierarchical appeal or a judicial claim.

Once a tax administration has decided on an administrative claim and the taxpayer has been notified of the final decision, the taxpayer may initiate judicial tax litigation by lodging an appeal.

If the cantonal tax administration is competent for the administrative claim, the appeal must be lodged with the cantonal court of first instance. In matters falling under the authority of the SFTA, the appeal must be lodged with the Swiss Federal Administrative Court.

In both cases, the time limit for lodging an appeal is 30 days from the day of notification of the contested decision. The appeal must be filed in writing, and it must contain a request as to how the appealed decision should be changed, as well as a statement of reasons.

General Procedure

Once an appeal has been lodged at the competent court, the court will generally request an advance payment for the presumed costs of the proceedings. Upon receipt of the payment, the court will forward the appeal to the competent tax administration for its opinion and a request for the file. The taxpayer can then file a response to the tax administration’s opinion. This is an unconditional right of the taxpayer – ie, the taxpayer may file an answer even if the court has not requested it.

Since the Swiss procedural rules in administrative matters provide for an essentially written procedure, in principle, no investigative acts, hearings or oral proceedings will be conducted. However, the courts – as an exception – may order oral hearings if this appears necessary to the court in question.

GloBE Minimum Tax

For litigations in connection with the Global Anti-Base Erosion (GloBE) minimum tax, the federal ordinance covering the implementation of the GloBE minimum tax in Switzerland (MindStV) implemented a separate procedure for litigations. Within 30 days of receiving the assessment, a written objection must be submitted to the cantonal authority which has assessed the top-up tax (ie, the Qualified Domestic Minimum Top-up Tax (QDMTT) and the Income Inclusion Rule (IIR); based on the applicable law, only one cantonal authority is responsible for assessing the top-up tax, even if the MNE has presences in more than one canton (“lead canton concept”)). The constituent entity liable for the top-up tax has the opportunity to challenge any decision issued by the competent cantonal authority. However, if the taxpayer, the cantonal authority responsible for the top-up tax and the SFTA all agree, an expedited appeal may be made directly to the Federal Administrative Court without involving the cantonal authority. Only one cantonal instance is available (contrary to the ordinary procedure).

In general, documentary evidence must be submitted to the court at the time of lodging the appeal, which is particularly important due to the burden of proof in Swiss tax litigation (see 4.4 Burden of Proof in Judicial Tax Litigation). If, for whatever reason, certain documentary evidence is not available at the time of filing the appeal, the evidence can be submitted later, if it was specified in the complaint. Witness hearings and on-site inspections are possible, but very rare in practice.

Producing evidence during the early stages of proceedings is generally more efficient and strategically more effective, although it is still possible to produce new documents, evidence or even expert reports during judicial proceedings (except before the Federal Supreme Court).

As a general rule in tax law, the tax authority has to prove facts that constitute a tax liability or increase a tax burden. The taxpayer, however, must prove facts that eliminate a tax liability or reduce a tax burden.

If the tax authority has sufficient circumstantial evidence reasonably to believe that a certain taxable event has occurred, the taxpayer bears the burden of providing evidence to show the opposite.

As a general rule, legal arguments and supporting evidence, including expert opinions, should be fully developed and documented during the administrative proceedings. Based on this, it is important to analyse the final decision of the tax administration and, if necessary, for the taxpayer to adjust its own legal reasoning to the arguments of the tax administration. It should be noted, however, that the courts are not bound by the tax administration’s reasoning, which means that they can base their decision on new legal reasoning. Consequently, the taxpayer must also independently examine alternative approaches to the tax administration’s reasoning, and it must be assessed in each individual case whether such approaches should be proactively addressed in the appeal. It should be noted that the courts do not have to inform the taxpayer if they choose to follow a different legal reasoning in their judgment compared to that of the tax administration.

Once the judicial litigation proceedings have started, the tax administration will be reluctant to discuss the possibility of a settlement or amicable solution, although the tax administration can still reconsider and issue a new decision. In practice, however, the chances that the tax administration will reconsider its decision are very limited, as the tax administrations sometimes try to have their own practice confirmed by the courts.

Last, but not least, timing can, in some cases, be a viable strategy. However, this strategy is more relevant in the case of indirect taxes, namely, VAT, as the statute of limitations is generally shorter than in the case of direct taxes. In the case of direct taxes, however, timing can also play a relevant role in the case of back taxes.

Switzerland is a civil law jurisdiction, where the most important sources for the courts are the statutes and also local case law. The European Convention on Human Rights (ECHR)’s case law is, in particular, taken into account in criminal tax proceedings.

In addition, international guidelines are also an important source for Swiss courts. This is especially true of the OECD’s transfer pricing guidelines. However, the courts consider the guidelines in general as merely interpretational guidance and, thus, not as binding rules. Finally, of course, doctrine is also a source of interpretation.

General Remarks

As set out in 4.1 Initiation of Judicial Litigation, regarding the appeal proceedings, there is a distinction between appeals concerning tax matters for which the cantonal tax administration is the competent authority (eg, federal and cantonal income taxes and cantonal wealth and capital taxes) and for which the SFTA is the competent authority (eg, withholding tax, stamp duty and VAT).

Appeal Before a Second-Instance Court

For tax matters that fall within the competence of the cantonal tax administrations, the cantonal appeals process must be followed. First of all, the appeal against the tax administration’s decision has (in general) to be lodged with the designated tax court (court of first instance). An appeal against that court’s decision must then be directed to the cantonal (higher) administrative court (if provided by cantonal rules), where both the taxpayer and the tax administration can lodge an appeal. In both cases, the appeal period is 30 days.

With regard to the right of appeal of the Swiss Federal Tax Administration, a distinction must be made: while, in the area of direct federal tax, the SFTA may already challenge cantonal assessment decisions, in relation to income, profit, wealth and capital taxes it is limited to filing appeals with the Federal Supreme Court against final cantonal court decisions. The cantonal courts can review all the facts and assess the case comprehensively. This can also result in the court making a decision that puts the appellant in a worse position than if no appeal had been filed (so-called reformatio in peius).

Judgments of a second-instance court may be appealed to the Federal Supreme Court.

Appeal Before the Swiss Federal Administrative Court

The Swiss Federal Administrative Court is responsible for reviewing the legality of decisions made by federal administrative authorities in Switzerland. The court has the jurisdiction to hear appeals against decisions made by federal authorities in various areas, including withholding tax, stamp duty and VAT.

As a general rule, judgments of the Federal Administrative Court are subject to direct appeal to the Federal Supreme Court.

Appeal Before the Swiss Federal Supreme Court

The Federal Supreme Court is the highest judicial authority in Switzerland. It is the last instance court for appeals in tax matters. The deadline for appealing to the Federal Supreme Court is in general 30 days from the date of the lower court’s decision. Appeals regarding international exchange of information in tax matters have to be lodged within ten days. The Federal Supreme Court has the power to review legal questions and ensure the uniform application of tax law throughout Switzerland. Its decisions are in general binding on lower courts and administrative authorities. Appeals to the Federal Supreme Court are generally limited to questions of law, and the court does not review the factual findings of lower courts or administrative authorities.

In contrast to the cantonal courts, the Federal Supreme Court does not re-establish the relevant facts of the case. Rather, it is bound by the findings of facts determined by the lower courts. The Federal Supreme Court can only correct these facts if it finds that they have been established by a lower court in an obviously incorrect manner or they are based on a violation of the law. This means that the Federal Supreme Court makes its decisions exclusively by applying the law to facts that have already been established.

GloBE Minimum Tax

Based on the MindStV, a separate appeal procedure has been implemented for litigations in connection with the GloBE minimum tax. A constituent entity subject to the top-up tax may appeal the objection decision issued by the competent cantonal authority before the Federal Administrative Court. Both the top-up tax-liable constituent entity and the SFTA, as well as the cantonal authority responsible for the top-up tax, have standing to appeal. The affected constituent entity must file an appeal within 30 days after the decision of the lower administrative authority (see 4.2 Procedure for Judicial Tax Litigation), while the cantonal authority or the SFTA have either 30 days or, in specific cases, 60 days to do so. Cantons that are not designated as the lead canton do not have the right to appeal. The judgment of the federal administrative court can be referred to the Federal Supreme Court.

For initiation and procedure, see 4.1. Initiation of Judicial Tax Litigation and 4.2 Procedure for Judicial Tax Litigation. The appeals system is outlined in 5.1 System for Appealing Judicial Tax Litigation.

In Switzerland, tax cases are usually heard jointly by three judges, with one judge presiding, at all levels of court – from the first cantonal instance court to the last cantonal instance court. However, the composition of the judges in cantonal courts may differ.

Single-judge cases in tax matters are typically reserved for minor issues that do not involve complex legal or factual matters. For example, disputes related to small amounts of tax or procedural matters may be handled by a single judge. For more complex cases or those with significant financial implications, a panel of three judges is typically formed.

In the Federal Administrative Court and the Federal Supreme Court, panels of five judges may be formed in cases concerning significant legal issues or public interest.

In all the courts, clerks are involved in addition to judges. The number of clerks depends on the size of the court and can vary from case to case. However, as a rule, there is at least one court clerk who is responsible for recording the hearing and documenting the decision.

While there are no national mediation or arbitration procedures for tax disputes in Switzerland, there is an Alternative Dispute Resolution (ADR) mechanism available on an international level: the Mutual Agreement Procedure (MAP). The MAP is part of most tax treaties Switzerland has concluded with other countries to avoid double taxation.

However, the two procedures operate independently of each other. This means that requesting a MAP does not suspend the deadline to file a claim against a tax assessment decision. To protect their rights under Swiss tax law, taxpayers should therefore additionally file a complaint against the tax authority where applicable.

As mentioned in 6.1 Mechanisms for Tax-Related ADR in This Jurisdiction, Switzerland does not have a national ADR mechanism. The following describes the procedure at an international level with regard to a MAP.

A MAP is generally initiated based on a request by the taxpayer in the country of residence. Certain DTTs also provide the possibility to address the MAP request in the other contracting state involved. The competent authority in Switzerland is the State Secretariat for International Finance (SIF). The request must generally be filed within three years of the first notification of the measure which could lead to double taxation.

In the case of a MAP procedure, the SIF informs the Swiss tax authorities concerned. The taxpayer is not a party to the mutual agreement procedure (MAP) conducted between the competent tax authorities and has neither a right to be heard nor a right of access to the file in the course of this intergovernmental procedure. In practice, however, the SIF keeps the taxpayer informed on the status of the procedure and takes account of the taxpayer’s suggestions.

If the SIF and the foreign competent authorities reach a mutual agreement, the taxpayer usually has 30 days to agree to the proposed outcome of the mutual agreement. If the agreement is approved, it becomes binding for the taxpayer, the cantonal tax authorities and the SFTA. If no mutual agreement is reached within a reasonable period of time (usually three years), newer DTTs often contain the possibility of an arbitration procedure (to be requested by the taxpayer).

If the competent authorities reach a mutual agreement, the competent cantonal tax authority shall issue a decision on the basis of the mutual agreement, to the extent necessary for its implementation (implementing decision). The same legal remedies may be exercised against the implementing decision as against the decision of the cantonal tax authority that concerned, or would have concerned, the subject matter of the implementing decision. Only the implementation of the mutual agreement may be challenged; its substantive subject matter as settled therein may not be challenged.

There are no national mediation or arbitration procedures for tax disputes.

In Switzerland, taxpayers can obtain binding advance information and rulings from the tax authorities to ensure tax certainty and prevent disputes. These rulings provide taxpayers with a binding decision from the tax authorities on the tax implications of a particular transaction or situation. To request a ruling, taxpayers must submit a written request to the relevant tax authority, including a detailed but succinct description of the relevant facts and a corresponding request regarding the fiscal assessment of the facts described. The ruling will thus only apply to the specified facts and taxes.

It is important to note that the tax authorities in Switzerland are not obliged to issue a ruling and will only do so if the request concerns a legal question that is not yet settled or if the case involves complex or unusual circumstances. Furthermore, there is no legal entitlement for taxpayers to receive a binding ruling, and, if a request is denied, taxpayers cannot contest the decision. In this case, taxpayers must assess whether they want to implement the planned action or transaction and thus take the chance of having to enter tax proceedings or whether they want to forego implementation.

The time needed to resolve an issue with the SFTA or the cantonal tax authorities depends on the scope and complexity of the issue. Normally, standard issues can be directly resolved with the competent tax authority in a co-operative way.

There is no domestic ADR mechanism under Swiss tax law. For the international ADR mechanism applicable to Switzerland, refer to 6.1 Mechanisms for Tax-Related ADR in This Jurisdiction.

ADR mechanisms may be used to resolve transfer pricing disputes that could lead to double taxation (see 6.1 Mechanisms for Tax-Related ADR in This Jurisdiction).

General Remarks

In principle, it should be noted that the ordinary tax assessment procedure and – if the tax has already been assessed – the supplementary tax assessment procedure are conducted separately from any criminal proceedings, whether in temporal or organisational terms. However, administrative and criminal proceedings are sometimes intertwined, which can be problematic due to the different rights (eg, prohibition of self-incrimination according to criminal procedural law) and obligations in the different proceedings.

In addition to criminal proceedings resulting from an incomplete assessment, pure breaches of procedural duty, such as failing to file the tax return on time or at all, must also be taken into account. For such violations of procedural obligations, the tax administration may – after issuing a warning – impose a fine of up to CHF10,000.

Additional Tax Assessments – Back-Taxes Procedure

If a tax return is found to be incomplete or incorrect during the tax assessment procedure, the additional tax may be assessed without a separate procedure in the same tax assessment. However, if the tax assessment is already final, the additional tax must be assessed in a separate procedure: the so-called back-tax procedure. This procedure is of a purely administrative nature and aims only at the correct taxation. In general, back-tax proceedings may only be conducted if new facts or evidence show that an assessment was erroneously not issued at all or that the final assessment is incomplete. The right to initiate back-tax proceedings expires ten years after the end of the tax period concerned.

In relation to indirect taxes, where the principle of spontaneous taxation applies, the SFTA has the authority to issue supplementary tax assessments if there is evidence of tax evasion, tax jeopardy, or failure to comply with legal obligations (eg, not submitting reports within the deadline specified by law).

Criminal Tax Evasion Procedure

As a preliminary remark, it should be noted that the Swiss Federal Supreme Court has established that a taxpayer can structure its affairs in such a way that it incurs as few taxes as possible. However, as soon as “improper means” are used, the limit of what is permissible is crossed and – in the absence of specific anti-abuse provisions – the taxpayer finds itself in a grey area.

Once the tax administration becomes aware that a final tax assessment may be incomplete, administrative and criminal proceedings are initiated and the taxpayer will be notified. If the incompleteness of the assessment is established during the ordinary assessment procedure, the correction can be made in the course of the current procedure, which means that no separate administrative procedure is required.

Tax Fraud and Embezzlement

Under Swiss direct tax law, tax fraud and embezzlement of taxes withheld at source are tax offences punishable as misdemeanours. Tax fraud is committed by using forged, falsified or substantively untrue documents, such as false financial statements or salary certificates, for the purpose of tax evasion. Embezzlement of taxes withheld at source is committed when a person obliged to deduct tax at source uses the deducted amounts for his or her own benefit or for the benefit of a third party. Both offences are punishable by imprisonment of up to three years or a monetary penalty. These offences must be distinguished from offences relating to the Swiss federal withholding tax (Verrechnungssteuer), for which the basic offence is withholding tax evasion under the Federal Withholding Tax Act and the qualified offence is Abgabebetrug under administrative criminal law.

Tax Evasion

Tax evasion is an offence and occurs when the taxpayer (without using forged documents), with intent or through negligence, omits certain items in their tax return or deliberately submits an incomplete tax assessment. Tax evasion is sanctioned by imposing a fine (no imprisonment), whereas the fine is usually equal to the amount of the evaded tax (the statute of limitations is ten years). The fine may be reduced by up to one third in the case of a minor fault and may be increased by up to three times in the event of serious wrongdoing. Where the incompleteness of the tax return was discovered prior to the final assessment (attempted tax evasion), the fine will be reduced by two thirds (the statute of limitations is six years).

Withholding Tax and Stamp Duty Offences

For withholding tax and stamp duty purposes, in general, fines can be imposed up to a maximum of CHF30,000. However, the maximum fine can be increased to up to three times the amount of evaded tax if that amount is higher than the aforementioned threshold of CHF30,000. With regard to VAT, tax evasion can lead to a maximum fine of up to CHF800,000, which can be increased to twice the amount of evaded tax. In the event of aggravating circumstances, the maximum amount of the threatened fine may be increased by half, along with a prison sentence of up to two years.

Tax Misdemeanours

In the case of tax misdemeanours (eg, violation of procedural obligations or tax evasion), the competent cantonal or federal tax administration is the same as for the back-taxes procedure (if that procedure is required) and for the criminal procedure. This accumulation of competence can be problematic in view of the protection of constitutional rights. For instance, in criminal proceedings, the taxpayer has the right to remain silent (eg, prohibition of self-incrimination), whereas, in the administrative back-taxes proceedings, the taxpayer is obliged to co-operate. In addition, the principle of in dubio pro reo applies in criminal proceedings – in contrast to administrative proceedings – which means that different rules of evidence apply. In light of this, whenever possible, criminal proceedings should (upon request) be conducted first, before the administrative back-tax proceedings can be processed. In practice, however, these proceedings are often conducted simultaneously.

Tax Offences

For tax offences (eg, tax fraud and embezzlement of tax at source) the public prosecutor is competent. If the competent tax administration is of the opinion that the taxpayer committed a tax offence, a charge is filed with the public prosecutor’s office, which is then responsible for further proceedings, which are governed by the Code of Criminal Procedure. The public prosecutor’s office will then – using coercive measures, if necessary – investigate the relevant facts and depending on the findings, close the case, issue a penalty order or refer the case to the court for judgment. Due to the fact that the public prosecutor’s proceedings are governed by the Swiss Code of Criminal Procedure, the procedure is generally more elaborate than the tax (evasion) procedure and leaves more room for investigative and even coercive acts.

The tax authorities generally initiate administrative and criminal proceedings if they have reason to believe that a tax return or a final assessment is incomplete or that self-reporting obligations are incomplete or missing (under the spontaneous declaration procedure). As previously mentioned (see 7.1 Interaction of Tax Assessments with Tax Infringements), a back-tax procedure generally entails a tax-evasion procedure which is of a criminal nature.

Back Taxes

The administrative procedure to determine back taxes follows the same procedural principles as the ordinary tax assessment procedure. Once the additional administrative procedure has been opened, the tax administration will present its findings proving the incompleteness of the tax assessment to the taxpayer and give the taxpayer the opportunity to comment on them. If the taxpayer cannot refute the allegations raised, the tax administration will issue an additional tax assessment.

Tax Misdemeanours

The procedure concerning tax misdemeanours varies from canton to canton. In general, however, the procedure is kept very simple. As in the additional administrative procedure, the taxpayer will have the opportunity to comment on the allegations before the administration renders a decision. In some cantons, the tax administration has an obligation to hear the taxpayer in person.

Tax Offences

Tax offences are not prosecuted by the tax administration but rather by the public prosecutor’s office. This procedure is governed by the Code of Criminal Procedure and is hence more regulated than the procedure regarding tax misdemeanours. The public prosecutor’s competence is limited to the criminal side of the case; thus, the back-taxes procedure will still be dealt with by the tax authority or the relevant administrative court.

Co-operation

The tax amount unlawfully evaded must, in any case, be paid in full. The fine itself is generally equal to the evaded tax, but can be reduced through co-operation by up to one third of the tax amount. In practice, however, the effects of co-operation are rather limited (see 7.1 Interaction of Tax Assessments With Tax Infringements).

Voluntary Disclosure Procedure

In order to avoid fines altogether, the taxpayer can voluntarily disclose a committed tax evasion or a tax fraud to the tax administration within the framework of a voluntary disclosure procedure. This possibility exists only once in a lifetime, and the notification must be made spontaneously. If the taxpayer assists in the determination of the tax owed and also pays the tax, no fine will be imposed. However, if the tax authorities already suspect an offence, the right to a voluntary disclosure without penalty is forfeited.

With the exception of voluntary disclosure (see 7.5 Possibility of Fine Reductions), it is generally not possible to avoid criminal proceedings by paying the evaded tax. However, in certain cases it might be possible to reach an amicable solution with the tax administration, whereby the tax administration waives the criminal prosecution and the taxpayer in return accepts the additional tax without appealing to the courts. However, this is limited to cases in which the facts or the legal situation are not absolutely clear.

Tax offences are exclusively handled by the criminal courts. The public prosecutor is responsible for prosecuting tax offences, and simply paying the tax owed does not prevent the procedure from continuing. Upon request, an accelerated procedure – and to avoid court proceedings – may be available before the public prosecutor, provided the accused admits the matters essential to the legal appraisal of the case and recognises, if only in principle, the civil claims. However, the accused is not eligible for the accelerated procedure in cases where the public prosecutor requests a custodial sentence of more than five years. If an accelerated procedure is conducted, the public prosecutor will prepare an indictment, which the taxpayer may either accept or reject.

For tax misdemeanours, the possibility of appeal is the same as outlined in 7.4 Stages of Administrative Processes and Criminal Cases.

For tax offences, an appeal to the second-instance court and then to the Swiss Federal Supreme Court is possible, if specific deadlines are observed.

In recent years, tax administrations in Switzerland have increased their scrutiny of transfer pricing. In principle, if the tax administration increases the transfer prices and adjusts them to the taxpayer’s disadvantage, this constitutes tax evasion.

However, as is well known, transfer prices are considered appropriate if they lie within a certain range, which means that there is no one exact transfer price. Since there is a certain discretion in setting transfer prices, transfer pricing adjustment by the tax administration, in general, does not lead to criminal consequences. Nevertheless, in cases where the basic principles of transfer pricing have been grossly neglected and, thus, violation of the arm’s-length principle was not only recognisable to the company or the persons in charge respectively but downright obvious, criminal penalties may be imposed.

In Switzerland, taxpayers can use both domestic litigation and the mechanism available under double tax treaties to resolve double taxation that arises from additional tax assessments or adjustments in cross-border situations. The available mechanism to resolve such tax disputes under double tax treaties is a MAP (including arbitration if provided for in the applicable tax treaty).

At the international level, Switzerland has incorporated anti-avoidance provisions, such as the Principal Purpose Test, in its recent double tax treaties. However, there is no specific legislation or regulations at the national level on anti-avoidance rules. Instead, the Swiss Federal Supreme Court has established general anti-avoidance rules which apply to all Swiss taxes. This general principle also applies to Swiss double tax treaties, in the absence of other specific anti-avoidance provisions in such treaties. It should be noted, however, that if a MAP application is found to violate national or treaty anti-abuse provisions, such as the taxpayer’s lack of good faith, the SFTA and the foreign tax authorities may consider that MAP application as abusive and may not seek a mutual agreement.

In Switzerland, disputes around transfer pricing adjustments are typically dealt with under the MAP mechanism provided for by the existing double tax treaties (including arbitration provisions if available under the relevant double tax treaty).

An appeal to the competent domestic court is also possible. In cases where pursuing domestic legal remedies is appropriate, it is nevertheless recommended to file for a Mutual Agreement Procedure (MAP). This procedure can, however, be stayed (suspended) until a legally binding decision has been reached.

An advance pricing agreement (APA) aims to align taxation for future years. In Switzerland, APAs are considered to be a specific type of MAP that generally follow the same rules as a MAP but might differ in some aspects of the procedure.

An APA can be concluded unilaterally (between a taxpayer and the competent Swiss tax authority), bilaterally or multilaterally. In practice, the process starts with a presentation of the facts and a formal request to the competent tax authority (ie the cantonal tax authority for granting unilateral APAs for income tax purposes; the SFTA for unilateral APAs relating to withholding tax (WHT); the SIF for bilateral or multilateral APAs). It is to be noted that unilateral APAs are subject to the spontaneous exchange of information to the same extent as a transfer pricing ruling with cross-border implications concluded with the SFTA.

It has been observed that tax disputes in cross-border situations have increased. In Switzerland, transfer pricing disputes have emerged as one of the most common cross-border situations that result in litigation. Similarly, the issue of withholding tax in cross-border transactions can also lead to disputes, particularly due to the high withholding tax rate of 35% and varying tax administration practices. Furthermore, the determination of tax residency for high net-worth individuals and companies can also result in cross-border-related disputes, particularly if there are disagreements over whether a taxpayer is a tax resident in Switzerland or another country.

As Switzerland is not an EU Member State, in principle this issue does not arise.

The European Union’s foreign subsidies regulation (FSR) targets external state aid that distorts competition within the Single Market. Swiss companies should therefore review whether they receive subsidies that are considered as distortive under the FSR.

As Switzerland is not an EU Member State, this issue does not arise.

As Switzerland is not an EU Member State, this issue does not arise.

As Switzerland is not an EU Member State, this issue does not arise.

Switzerland signed the Multilateral Instrument (MLI) on 7 June 2017 and ratified it on 29 August 2019. The MLI entered into force on 1 December 2019. However, it covers only 13 of Switzerland’s more than 100 double taxation agreements.

Independently of the MLI, Switzerland seeks to supplement its double taxation agreements with an arbitration clause wherever possible.

In principle, all double taxation disputes that cannot be resolved by mutual agreement under a MAP may be submitted to arbitration. Switzerland takes the position that arbitration proceedings may be conducted even where final and binding court decisions exist.

However, various double tax treaties restrict the scope of tax arbitration. Grounds for exclusion include, in addition to the existence of final and binding court decisions, the initiation of ordinary or extraordinary appeal proceedings, breaches of co-operation obligations, and cases involving serious abuse or significant tax evasion. In some double taxation agreements, arbitration is further limited to unresolved issues relating to business profits (including transfer pricing matters).

Switzerland has opted for final-offer arbitration in the arbitration clauses in its tax treaties. Under this method, also known as “baseball arbitration”, the competent authority of each state involved submits a proposal to the arbitration panel. The panel must then choose between the two proposals.

Switzerland is not a Member State of the European Union, but it has followed the current trends in international arbitration proposed by the OECD, of which it is a founding member.

The impact can be seen in the fact that Switzerland has signed the MLI and is including arbitration clauses in its DTTs (see 8.1 Mechanisms to Deal With Double Taxation).

As already mentioned, Switzerland is not a Member State of the EU, but it follows international developments. Thus, as previously stated, the MLI has been signed, and the minimum standard is being implemented.

Pillar Two is aimed at establishing a global minimum tax rate of 15% for multinational companies with a turnover of at least EUR750 million. Switzerland has expressed its support for this initiative.

On 18 June 2023, the Swiss electorate voted on the implementation of the OECD/G20 minimum taxation (and the creation of the constitutional basis for the introduction of Pillar Two) with the proposal being approved by 78.5%. The referendum was necessary as the introduction of the OECD/G20 minimum taxation required an amendment to the Federal Constitution. This was because the OECD/G20 minimum taxation would have contradicted the constitutional principle of equal treatment of taxpayers. With the approval of the constitutional amendment, which came into force on 1 January 2024, the Federal Council enacted the ordinance on minimum taxation at federal level on the same day. At the same time, some cantons also decided to increase tax rates for companies.

It is to be noted, though, that the minimum taxation in Switzerland was limited to the national supplementary tax (Qualified Domestic Minimum Top-up Tax – QDMTT) in 2024. As from 1 January 2025, the Income Inclusion Rule (IIR) entered into force. The Federal Council has refrained from applying the Undertaxed Profit Rule (UTPR) for the time being but could implement it with an update of the ordinance. The partial introduction of the minimum taxation results in a tax increase for Swiss corporate groups and in particular US corporate groups with directly held Swiss constituent entities, provided the GloBE Effective Tax Rate (ETR) in Switzerland is below 15% (and no corresponding substance-based income exclusion applies).

Recent administrative guidance issued by federal authorities addresses procedural aspects of GloBE implementation, including centralised filing requirements and international information exchange mechanisms, and reflects ongoing efforts to streamline compliance.

These developments, while administrative in nature, have practical relevance for dispute resolution, as they clarify reporting expectations and the interface between domestic and cross-border procedures.

In Switzerland, decisions of tax arbitration panels rendered under applicable MAP provisions are not made public by the competent authorities.

DTTs play a significant role in promoting international economic activities by preventing the double taxation of private individuals and legal entities with an international connection in the area of taxes on income and capital. Switzerland has an extensive network of DTTs with more than 100 countries and is striving to expand it further. In addition, Switzerland has currently entered into eight agreements to avoid double taxation with regard to inheritance and estate taxes. Hence, the competent Swiss authorities rely mainly on this network of agreements to resolve international tax disputes.

As mentioned in 6.2 Settlement of Tax Disputes by Means of ADR, the taxpayer is not a party to a MAP and therefore the tax representatives are not involved in the proceedings. However, the tax administration is willing to co-ordinate with a tax representative to accept material inputs that can be used in the negotiations.

No fees, etc, are charged for litigation at the administrative level.

However, even if a formal administrative complaint is lodged with the tax administration, the disputed taxes are still due. Hence, up until payment of the disputed taxes, late interest of up to 5% will accrue. Therefore, the taxpayer should always consider paying the disputed tax – with reservations – in order to avoid being charged late interest.

Cantonal court fees vary between instance and canton. In 2024, for example, according to the first-instance tax court of the Canton of Zurich, the judicial court fees amounted on average to CHF4,400. By comparison, the average court fees of the administrative court of the Canton of Zurich amounted to CHF9,400. However, it should be noted that the court fees are calculated based on the amount of disputed tax and the complexity of the case. Individual fees may therefore differ substantially, but they may only exceed CHF50,000 in particularly complex cases.

As at the cantonal level, before the Federal Administrative Court and the Federal Supreme Court, the fees are calculated based on the challenged amount, the scale and complexity of the case, the parties involved in the procedure and their financial situation. The fee cannot exceed CHF100,000.

In general, the court fees are borne by the unsuccessful party. If the taxpayer succeeds, the tax administration will be obliged to reimburse part of the legal costs incurred for representing the taxpayer (see 11.3 Indemnities).

With regard to the court fees, the courts usually request an advance payment. If the requested advance payment is not paid in time, the courts will not proceed with the appeal and will close the case.

If the court decides that the initial tax assessment is absolutely null and void, no compensation will be paid. The taxpayer can, however, claim a partial reimbursement of the costs incurred for legal representation. It should be noted that standard hourly rates are applied and that the amount of time deemed reasonable by the court is often less than the actual time incurred. Hence, the compensation for representation costs usually does not cover the actual costs.

Of course, any amount already paid by the taxpayer will have to be reimbursed with potential interest in the taxpayer’s favour.

The MAP, including the arbitration procedure, is free of charge. However, the taxpayer bears the fees for any legal advice and there will be no reimbursement if a settlement can be reached.

Unless stated otherwise, the following statistical information set out is based on the most recent publicly available figures from the Canton of Zurich. Zurich is used as a reference canton primarily due to its size and the resulting volume of tax litigation, while comparable court statistics are also published by other cantons.

The first-instance tax court of the Canton of Zurich registered 498 new cases for 2024 (latest data available). Considering the cases already pending (369 from 2023), the court was able to settle 534 cases (534 in 2024). On average, the duration of the proceedings is around eight months.

The Administrative Court of the Canton of Zurich, as the second cantonal instance, handled approximately 200 tax disputes in 2024 (latest data available). Of the total pending tax proceedings of 271 cases, 190 cases were closed in 2024.

The latest report available from the Federal Administrative Court indicates that, during 2024, this court processed 143 cases in tax matters (excluding cases concerning exchange of information). The Federal Supreme Court processed 282 cases in the same period. With regard to the pending cases for the different tax types, no data is available, neither for the Federal Administrative Court nor for the Federal Supreme Court.

Additional statistics on values dealt with are not available for either the cantonal or federal courts.

First-Instance Tax Court of the Canton of Zurich

For the year 2024, the first-instance tax court of the Canton of Zurich reported 498 new cases, of which around 451 (around 90%) relate to income and wealth tax for individuals as well as corporate income and capital tax. The administrative court of the Canton of Zurich does not provide any details on the different taxes concerned – however, it appears reasonable to assume that the ratio of the taxes concerned is similar to that of the first instance court.

Federal Administrative Court

In 2024, the Federal Administrative Court processed five cases for subsidies (compared to 13 cases in 2023), 35 cases for customs (compared to 45 in 2023), four cases for stamp duties (four in 2023), no cases for direct taxes (three in 2023), 92 for VAT (47 in 2023), one for various indirect taxes (six in 2023), 15 for withholding tax (16 in 2023), none for double taxation (none in 2023) and one for miscellaneous finance (two in 2023). The total value at stake of these proceedings is not available.

With regard to the newly initiated cases for the different tax types, there is no data available for the Federal Administrative Court.

Federal Supreme Court

In 2024, the Federal Supreme Court processed 223 cases for direct taxes (224 cases in 2023), two for stamp duties (one in 2023), 30 for indirect taxes (17 in 2023), eight for withholding tax (five in 2023), 17 for military service exemption tax (three in 2023), two for double taxation (five in 2023), 42 for other levies (51 in 2023), 17 for customs (16 in 2023) and 15 for tax exemption (nine in 2023).

With regard to the newly initiated cases for the different tax types, there is no data available for the Federal Supreme Court.

According to the statistics of the first instance tax court of the Canton of Zurich, the success rate from the taxpayer’s point of view is around 27%, taking into account both full and partial decisions in favour of the taxpayer. In cases before the administrative court of the Canton of Zurich, this success rate drops to around 18%, taking into account both full and partial decisions in favour of the taxpayer.

The statistical data provided by the Federal Administrative Court and the Federal Supreme Court in their annual reports does not include any information on the outcome of tax-related proceedings. However, according to a private study and on the basis of Federal Supreme Court data for the past ten years, the success rate – again from the taxpayer’s point of view – is only 14%.

This data underlines the importance of the administrative procedure and confirms that, whenever possible, an attempt should be made to resolve the disputed matter with the tax administration.

In Switzerland, there are comparatively few tax litigations (see 12.1 Pending Tax Court Cases and 12.2 Cases Relating to Different Taxes). One possible explanation for this is the common use of tax rulings (see 1.3 Avoidance of Tax Controversies and 6.4 Avoiding Disputes by Means of Binding Advance Information and Ruling Requests). Tax rulings provide taxpayers with a binding decision from the tax authorities on the tax implications of a particular transaction or situation.

If there is still disagreement between the taxpayer and the tax authority, the tax authority is, in complex cases, usually open to discuss an amicable solution. The administrative procedure allows the parties to discuss the facts and try to reach an agreement.

Nevertheless, careful advance planning is essential to avoid unexpected surprises. Particularly in the case of complex issues, it is necessary to analyse the situation in advance and, if necessary, enter into dialogue with the tax authorities at an early stage to seek a tax ruling in order to create legal certainty and avoid unexpected conflict.