The European Court of Justice (ECJ) made an important decision on February 26, 2019. He said that Germany and Switzerland must allow tax deferrals. This decision shows how important tax deferrals are for tax planning.
Tax deferral in Switzerland helps private individuals and companies in financial difficulties. It is a temporary measure if immediate tax payments lead to serious difficulties. This allows taxpayers to overcome financial hurdles without breaking the law.
In 2022, only 1.4% of insolvency proceedings in Switzerland were concluded with a “debt restructuring moratorium”. Nevertheless, the success rate of this measure can reach up to 60%. This shows that it is rarely used, but can be very helpful.
Important findings
- The ECJ ruled that the AFMP between Germany and Switzerland allows tax deferral.
- Tax deferral in Switzerland offers financial relief for taxpayers.
- This instrument is particularly helpful in cases of considerable financial bottlenecks.
- The legal basis for tax deferral is clearly defined and requires a precise application.
- In Switzerland, debt restructuring moratoriums are underused, despite a high success rate.
What is tax deferral?
A tax deferral is a postponement of the tax payment. It is granted by the tax authorities. This enables taxpayers to overcome financial bottlenecks.
Swiss tax law and § 222 of the German Fiscal Code (AO) regulate this. The conditions for a tax deferral are precisely defined.
Legal basis
Taxpayers must fulfill certain conditions in order to receive a deferral. This includes older tax assessments and information on income and expenditure. Tax provisions must also be documented.
There can be many reasons for a deferral. For example, separation or relocation costs, as well as debts or loss of income due to unemployment.
You can defer the deferral or pay in installments. It usually lasts no longer than a year.
Differences to other administrative acts
Tax deferrals differ from other administrative acts. They serve to facilitate payment and do not change the tax liability. Approval depends on the financial situation.
If successful, the taxpayer receives a confirmation. This states the new terms of payment.
| Feature | Tax deferral | Tax assessments |
|---|---|---|
| Goal | Shifting the payment data | Determination of tax amounts |
| Basis | Tax law, § 222 AO | Tax laws, notices |
| Duration | Up to one year | Permanent until changed |
Specialist agencies offer help with debt and budget problems. Information is available at httpss://schulden-ag-so.ch/ and httpss://budgetberatung.ch/.
Requirements for a tax deferral
Certain conditions must be met in order to receive a tax deferral. These include financial necessity and formal requirements. It is important to know these criteria. This allows you to plan your taxes correctly and seek advice if necessary.
Financial necessity
A tax deferral is possible if immediate payment would place a heavy burden on the taxpayer. If unforeseen expenses threaten your existence, you can apply for this. It must be ensured that the tax claim can still be claimed later.
Formal requirements
Formal requirements are very important for a tax deferral. The written application must be received by the tax authorities before the deadline. It must contain all information that explains the financial emergency. Special forms are also required, such as land register forms 2b and 2c. These steps are necessary so that the authority can process the deferral.
The deferral period is usually three or four years. During this time, the office checks whether all criteria have been met. If so, tax exemption and deletion of the mortgage will be granted. Otherwise the tax must be paid with interest.
| Condition | Detail |
|---|---|
| Move-in period for main residence | One year for a deferral of three years; two years for a deferral of four years |
| Transfer tax | The first 800,000 francs of the purchase price are exempt under certain conditions |
| Application deadline pursuant to Art. 11a HStG | Within 30 days of expiry of the deferral period |
Tax deferral in Switzerland
Tax deferral in Switzerland brings advantages for companies and individuals. It covers the application process, processing time and how decisions are made.
Application process
To get a tax deferral, you have to fill out a form. This is then submitted to the tax authorities. All necessary documents should be included.
Once everything has been submitted, the tax authorities check the documents carefully.
” Tax optimization through a tax deferral can be a sensible strategy to bridge short-term liquidity bottlenecks without neglecting obligations.”
Processing time and decision-making
How long the processing takes depends on the case. The tax authorities take a close look at the financial situation. This is important in order to decide whether a tax deferral is granted.
Interest rates and special conditions are also checked. Depending on the complexity, the decision may take several weeks.
| Step | Description |
|---|---|
| Application | Submission of the application to the cantonal tax administration with all the necessary documents. |
| Examination | Analysis of the applicant’s financial situation by the tax authority. |
| Decision making | Determination of interest rates and framework conditions and notification of the decision. |
Planning and timely application help to secure important tax benefits. They are part of tax optimization.
Tax benefits and strategies
In Switzerland, taxpayers, especially companies, use tax optimization. They use tax strategies to improve their situation and maximize tax benefits. Deferring tax payments helps to overcome short-term financial bottlenecks without tax disadvantages.
Postponing tax payments offers major tax advantages. This is especially true if you have already used all other tax deductions. This allows you to keep taxes low with a clever combination.
Tax optimization strategies
Corporate tax experts use various methods to save taxes. The most common approaches include:
- Targeted tax deferrals improve liquidity.
- Use of education deductions and business expenses.
- Taking advantage of international tax reforms and agreements to avoid double taxation.
- Adjustment of the corporate structure to minimize taxes.
| Strategy | Description | Example |
|---|---|---|
| Tax deferral | Postponement of tax payments to bridge bottlenecks | Short-term liquidity improvement |
| Deductions | Reduction of the tax burden through various deduction options | Training costs, business expenses |
| International tax reforms | Exploiting reforms and agreements to avoid double taxation | Cross-border tax planning |
| Structural optimization | Reorganization of a company for optimal tax efficiency | Relocation of sites or restructuring |
Private individuals and companies can save a lot by using tax strategies correctly. Taking advantage of tax reforms and adapting the corporate structure brings lasting benefits.
Challenges and risks associated with tax deferral
Tax deferral offers not only advantages, but also challenges and risks. Assessing your own finances is a major challenge. It is important that all financial information is accurate.
Another problem is that tax deferral can increase the overall tax burden. This is due to the additional interest that can accrue. It is therefore crucial to take a close look at all the financial implications.
There are also risks if the authorities do not recognize the tax deferral. This can lead to an application being rejected. In this case, all previous default interest must be paid immediately.
Although tax reforms are intended to improve the situation, many processes remain complicated. In Switzerland, for example, the probate procedure has become simpler. However, the use of such procedures remains low, even after reforms.
In summary, it can be said that tax deferrals do help in the short term, but they do entail risks. Careful planning and evaluation is essential. Further details on the challenges and restructuring procedures in Switzerland and Germany can be found here.
Conclusion
Tax deferral is very important for tax planning in Switzerland and Germany. On February 26, 2019, the ECJ ruled that the German rules on exit taxation are a restriction on the freedom of establishment. This compares how taxpayers who move to Switzerland or stay in Germany are treated.
According to the letter from the Federal Ministry of Finance on 13.11.2019, taxes are paid in five installments when moving to Switzerland. This is done without a security deposit, unless there is a risk to the tax claim. Critics say that this regulation is not as good as complete deferral until the shares are sold.
Tax deferral has many advantages for tax planning. To take advantage of these benefits, you need good preparation and advice. You can find out how complex these issues are under Corporate Taxes Switzerland. Qualified advice is necessary in order to really take advantage of the tax benefits.
Companies and individuals must always keep their tax strategies up to date. Applying for a tax deferral at an early stage helps to overcome financial problems without suffering serious disadvantages. This shows that tax deferral is not just a quick solution, but part of smart tax planning.