An oversight, a mistake made in good faith or a poorly managed cross-border situation can lead to a tax offence, sometimes without the taxpayer being fully aware of it. Whether it’s a question of undeclared foreign accounts, a property that has been overlooked in the declaration of assets or a dividend that has been incorrectly broken down, it is often possible to regularize the situation spontaneously, before a tax audit is carried out. But to do so, you need to act correctly, methodically and strategically.
Why regularize on a voluntary basis ?
Spontaneous denunciation (or voluntary corrective declaration) enables the taxpayer to regain the initiative vis-à-vis the tax authorities. It consists in spontaneously declaring an error, an omission or an irregular situation before the launch of an audit or the receipt of a request from the tax authorities.
This gesture can make it possible to:
– limit or avoid penalties;
– demonstrate good faith;
– regularize a risky situation without media coverage or litigation;
– start afresh on a sound footing in the event of a future transfer of assets, expatriation or inheritance.
What situations are covered ?
Voluntary regularizations concern many frequent cases, such as :
– Foreign bank accounts forgotten or not declared (often old or inactive);
– Real estate located outside the country of residence and not included in the declaration (IFI in France, cantonal wealth tax in Switzerland);
– omitted foreign income (interest, dividends, pensions, rents);
– undeclared patrimonial companies, in particular when they hold real estate;
– errors in the procedures for claiming a tax credit or applying a bilateral tax treaty.
In a Franco-Swiss context, the line between a simple error and a high-risk situation can be a fine one. This is why an in-depth analysis, integrating the specific features of both jurisdictions, is essential.
Which procedure to follow and when ?
Voluntary regularization is not a formal administrative procedure in the strict sense of the term. It is based on the initiative of the taxpayer, who sends the relevant administration a complete file accompanied by a letter of explanation and the necessary supporting documents.
The more this procedure is carried out before any warning, control or official request, the more benevolent the administration will be. In France, this practice is currently dealt with on a case-by-case basis, without any official mechanism such as the now-closed STDR (Service de traitement des déclarations rectificatives).
Switzerland, on the other hand, generally accepts spontaneous regularization (non-punishable self-disclosure), provided it takes place before any proceedings are initiated and covers all irregularities.
Voluntary regularization is not a formal administrative procedure in the strict sense of the term. It is based on the initiative of the taxpayer, who sends the relevant administration a complete file accompanied by a letter of explanation and the necessary supporting documents.
What are the risks of not regularizing ?
Failure to regularize may result in:
– automatic taxation, based on sometimes arbitrary grounds;
– substantial penalties, up to 80% in France in the case of fraudulent maneuvers;
– the initiation of tax litigation, or even criminal proceedings in the case of blatant concealment;
– the calling into question of an asset structure or estate planning.
The automatic exchange of information (notably via the Common Reporting Standard – CRS) is now unlikely to result in a definitive oversight. Spontaneous regularization therefore enables us to regain control of the file and demonstrate the transparency of our approach.
Accompaniment to help you regulate in complete safety
BERGEOT PAOLI Associés assists individuals, managers and wealthy families with voluntary tax regularization procedures, in France and Switzerland. We analyze the origin of any discrepancies, qualify the risks involved, draw up the complete tax file and ensure dialogue with the relevant authorities.
We also act preventively, before any transfer or departure abroad, in order to regularize what needs to be regularized in a controlled, discreet and legally secure manner. To find out more about our intervention methods, consult our regularization procedures with the tax authorities.