Simplified Post-Taxation of Heirs

Around fifteen years ago, Swiss tax law introduced a pragmatic and interesting instrument: the simplified post-taxation of heirs. This regime applies in cases where heirs inherit an estate that includes undeclared assets or income which the deceased failed to report during their lifetime. It is available both at the federal level (direct federal tax) and across all cantons.

Where the conditions for applying the simplified post-taxation of heirs are met, the taxation is limited to the three tax periods preceding the year of death, instead of the usual ten-year period. In addition, no fines for tax evasion or penalties for tax fraud are imposed.

The following conditions must be met cumulatively to qualify for the simplified post-taxation procedure:

1. The tax evasion was not previously known to any tax authority;
2. The heirs fully cooperate with the tax authorities in identifying the concealed assets and income; and
3. The heirs make a genuine effort to settle the outstanding tax liability.

The law does not explicitly require heirs to file a voluntary disclosure to benefit from the simplified post-taxation. Thus, it has been unclear until now whether an active disclosure by the heirs was necessary.

Federal Supreme Court Decision

In its recent decision, the Federal Supreme Court has brought clarity to this previously unresolved issue (9C_42/202405.12.2024 - Schweizerisches Bundesgericht).

The Court held that heirs may only benefit from the simplified post-taxation if they actively request its application. In the case at hand, the heir had not disclosed the undeclared assets before the tax authorities discovered them independently. Consequently, the ordinary post-taxation procedure applied, resulting in taxation of the ten years preceding the year of the deceased’s death.

Practical Implications

This decision brings legal certainty and highlights the need for timely proactive steps by heirs who wish to benefit from the simplified post-taxation regime.

This means that heirs must carefully review the tax history of the estate to identify any potential irregularities. If there is any indication of previously undeclared assets or income, a voluntary disclosure should be submitted promptly. This ensures that the favorable treatment under the simplified post-taxation rules remains available. A lack of knowledge about the deceased's tax omissions does not protect heirs from the negative consequences of a standard post-tax procedure.

The key benefit at stake is the limitation of the taxation period to just three years instead of ten—a significant advantage, particularly given the cumulative interest charges associated with a ten-year post taxation.

Our Private Clients team is available to support you with any questions regarding estates, voluntary disclosures, or taxation matters.