Tax audits are a fundamental component of Switzerland’s tax compliance framework, ensuring that businesses adhere to  tax laws and regulations. While annual statistics on the exact number of corporate tax audits are not publicly available, tax compliance initiatives contribute significantly to federal and cantonal revenues.

With the growing emphasis on transparency and regulatory compliance in Switzerland, understanding how to prepare for a tax audit is increasingly crucial for businesses. Proactive preparation and regular review of tax obligations can help companies manage audits smoothly and address potential risks before they escalate. In this insight, we outline key questions and strategies to support you through preparing for a corporate tax audit in Switzerland.

Is my company subject to an annual tax audit in Switzerland?

Entities like public limited companies, limited liability companies, cooperatives, associations, and foundations are all subject to corporate income tax and may be selected for a tax audit. Swiss tax authorities review returns and may conduct audits either at the company’s premises or through the accounting firm managing the finances.

While there are no definitive rules on which companies will undergo a tax audit, tax authorities internally select companies based on various factors. These may include:

✔ Score analysis that identifies unusual deviations from industry standards.
✔ Company size and financial impact, with larger entities or those with substantial taxable income often audited more regularly.
✔ Previous audit results, particularly if there were significant adjustments.

Although the audit selection criteria are not public, companies with significant taxable income should anticipate an audit annually. Additionally, companies flagged with substantial adjustments in past audits may also face increased audit scrutiny in the future. Tax audits are always announced in advance, allowing adequate time for preparation.

Which authorities are responsible for corporate tax audits in Switzerland?

In Switzerland, corporate tax audits are conducted by the cantonal tax authorities of the canton in which the company is headquartered. Each canton has its own tax administration that is responsible for assessing and auditing taxes at various levels, including federal, cantonal, and municipal levels. This decentralized approach allows cantonal authorities to apply region-specific knowledge and compliance practices while also aligning with national regulations.

While cantonal tax authorities handle the majority of corporate audits, the Swiss Federal Tax Administration (SFTA), known in German as “Eidgenössische Steuerverwaltung” (ESTV), may also become involved in specific cases, particularly when federal tax matters are at stake. The SFTA typically steps in for issues related to federal income tax, withholding taxes, and cases involving complex tax structures that require federal oversight.

Am I required to provide all information requested by the tax auditor?

Yes, companies must provide all information necessary to ensure an accurate tax assessment. This includes:

✔ Oral or written explanations related to tax positions.
✔ Account books, receipts, and any documentation regarding business transactions, even if the information does not directly affect your tax position.

Importantly, tax auditors in Switzerland are bound by strict tax privacy rules. This means any information disclosed during the audit is confidential and solely used for tax assessment purposes.

What are the best steps to prepare for a corporate tax audit in Switzerland?

Preparation can be divided into immediate actions for a pending audit and long-term practices to minimize audit risk:

Immediate Preparation:

1. Carefully complete the audit questionnaire with accurate answers.
2. Gather and organize all relevant documents.
3. Prepare clear, concise explanations of your tax positions.
4. Reconcile figures in your accounting records with those reported in your tax return.

Long-Term Preparation:

✔ Regularly assess tax risks associated with your business activities.
✔ Minimize risk by ensuring compliance with tax regulations, especially in areas such as related-party transactions, transfer pricing, and safe haven interest rates.
✔ Keep comprehensive and systematic records, retaining tax-relevant documents for the required period to ensure they are readily accessible if an audit arises.

What actions can I take if I disagree with the outcome of a corporate tax audit?

If you find yourself in disagreement with the outcome of a corporate tax audit in Switzerland, it’s essential to follow a structured approach to address the issue effectively:

1. Engage in Direct Discussion with the Tax Auditor: Initiate a conversation with the tax auditor to discuss the specific adjustments. Present your position clearly, supported by relevant documentation and legal arguments. This proactive engagement can often lead to a resolution of the issue.
2. File a Formal Objection: If the discussion does not yield a satisfactory outcome, you will receive a formal tax assessment. You have the right to file an objection with the cantonal tax authority within 30 days of receiving the assessment. This objection should detail your reasons for disagreement and include any supporting evidence.
3. Proceed to Judicial Appeal if Necessary: Should the cantonal tax authority reject your objection, you can escalate the matter by filing an appeal with the cantonal tax court. If the dispute remains unresolved, further appeals can be made to the Federal Supreme Court.
4. Seek Professional Legal Assistance: Navigating the complexities of tax disputes can be challenging. Engaging a legal professional with expertise in Swiss tax law can provide invaluable guidance and increase the likelihood of a favorable outcome.

It’s important to adhere to all deadlines and procedural requirements throughout this process to preserve your rights and ensure that your case is considered appropriately.

LINDEMANNLAW offers expert tax advisory services designed to meet the specific needs of your business, whether you are preparing for a tax audit, ensuring ongoing compliance, or addressing tax disputes. With a team of experienced tax professionals, we take a comprehensive approach to managing tax matters that not only safeguards your interests but also supports long-term alignment with Swiss tax laws. For personalized assistance and expert advice on tax audit preparation or compliance, contact us today. We are dedicated to delivering responsive, reliable support tailored to your business needs, guiding you through each step of the process with clarity and confidence.

Disclaimer:
The strategies and information provided herein are for general informational purposes only and do not constitute legal advice. Businesses should consult with a qualified attorney at LINDEMANNLAW for tailored legal advice specific to their individual circumstances and to ensure compliance with applicable laws and regulations.