When your overseas property causes a tax evasion case in Switzerland

It could be family assets, a vacation home, a property for a planned retirement in the sun, or simply an income-generating investment; investing in real estate overseas can be an exciting venture, offering the promise of financial returns and a foothold in a different country. However, it's crucial for investors to tread carefully, as negligence regarding tax obligations can turn the dream of international property ownership into a legal nightmare.

Real estate holdings abroad can inadvertently become entangled in tax evasion cases when individuals fail to comply with the tax laws of the respective countries where the properties are located and at your tax domicile in Switzerland.

1. Understanding Tax Evasion:
   Tax evasion involves underreporting income, hiding assets, or engaging in fraudulent activities to evade tax obligations. Tax evasion is a criminal offense that can lead to severe penalties, including fines and criminal proceedings. Tax evasion has no lower limit, it does not matter if the underreported asset or income is only worth CHF 1.-.
   
   

2. Tax and declaration obligation of your real estate portfolio:
   While many people are aware that they have to pay tax on rental income generated from real estate and property tax in the country where the residential holdings are located, many newcomers are not aware that they also have to declare their properties from abroad in Switzerland.
   
   The reason for this obligation is the legal basis for determining the tax rate, which is based on worldwide income and assets. It is therefore worth, beside purchase and rental contracts, submitting all receipts for value-preserving investments and property taxes paid abroad to your Swiss tax advisor.
   
   But don't worry, the property values are only used to determine the tax rate. The value of the real estate and its income are taxed in the state of its location.
   
   

3. Benefits from foreign mortgages:
   Foreign mortgages and debt interest paid abroad, on the other hand, may bring tax advantages in Switzerland. They are allocated according to the activa of an individual. Having a large asset management portfolio in Switzerland, is not only worthwhile because of the professional management, but also positively influences your tax, when it comes to debt allocation for fiscal purposes.
   
   

4. Voluntary disclosure:
   In Switzerland, you have a 'once in a lifetime' opportunity to report 'forgotten' income or assets without penalty. The prerequisite is that the tax authorities have no knowledge or indications of the assets, and an appropriate request for exemption from prosecution must be submitted. Seek advice for this process.