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Completing your tax return – answers and tips

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It's that time again at the end of March: Tax returns need to be filed – something that most of us struggle with. What is taxable? What can I deduct? And: What can happen if the details I provide are not entirely accurate?

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    Stefanie Gugger

    Stefanie Gugger is a certified tax expert with PrimeTax. Previously she worked for over ten years at various fiduciary companies. She answers key questions that can come up when filing tax returns and reveals which mistakes that you make on your tax return can lead to prosecution.

Are neighborhood association membership fees tax-deductible?

Membership fees for political associations are tax-deductible. Any other association fees cannot be deducted for tax purposes. 

My partner and I have a joint account. Whose tax return does this have to be included on? 

If each of you is required to complete a separate tax return, you both need to declare half of the income from that account. 

We own a holiday home in Ticino, but only use it for six months in the year. Do we have to enter the full imputed rental value on the tax return – or is it sufficient to declare half of this amount?

Provided the property is at your disposal, you have to declare the imputed rental value for the entire year, regardless of how much you effectively use it. 

Two years ago we gave our daughter an interest-free loan of CHF 30,000. She still owes us CHF 18,000. Are we required to state this amount on the tax return? 

Yes, loans have to be declared whether they bear interest or not. The loan must be declared as a receivable in the securities statement and is subject to wealth tax. However, the fact that no interest is received makes the loan exempt from income tax. On the other hand, your daughter can declare the loan as a debt in the debt statement.

I am a member of the WWF. Can I deduct my membership fee – or is it only donations that are deductible?

As regards deductible donations and non-deductible membership fees, the determining factor is whether the payment is voluntary or not. A membership fee is usually stipulated in the bylaws of the respective NGO. Consequently, the NGO is entitled to receive a membership fee. This means that membership fees do not qualify as a donation. In other words, they are non-deductible. 

I own a condominium in the Zurich Oberland that I have rented out. My wife and I live in Schaffhausen. What deductions can I make?

Maintenance costs, insurance premiums (fire, natural perils, water damage, glass and liability insurance) and third-party management costs can be deducted from the rental income. Maintenance costs are considered equivalent to investments in energy saving and environmental protection.

The taxpayer may claim a flat-rate deduction for privately held properties instead of the actual costs and premiums. As a rule, the choice between a flat-rate deduction and the actual costs can be made each year. In the majority of cantons, the flat-rate deduction is equal to 10 % of the rental income or rental value if the building is no more than ten years old at the beginning of the tax period, or 20 % of the rental income or rental value if the building is older than ten years by that date.

A distinction is made between maintenance costs and value-adding investments, which cannot be deducted on the tax return as maintenance costs. Expenditures which permanently improve the condition of the property are considered to be value-adding.

We live in a condominium. Can I still deduct the costs of a new washing machine and tumble dryer on my tax return?

It depends. As long as these are purchases that maintain the value of the property, they are deductible. Purchases are considered to maintain value if they replace an existing installation with a new installation of equal value. However, if an installation of higher value is purchased, this is likely to represent a part increase in value at minimum. The tax authority will therefore probably make a pro rata downward adjustment of the purchase costs. This is relatively unlikely in the case of washing machines and tumble dryers. It happens more frequently with kitchen appliances – for instance, if a standard oven is replaced by a combi steamer. Since a steamer first needs to be installed, the tax authority will normally adjust down the cost of the new appliance. 

I had major dental treatment last year. Can I deduct this from my taxes?

Provided these costs are not covered by insurance, the bill – together with all other medical expenses (health insurance deductibles and excess, optician's fees, etc.) – can be claimed under sickness and accident costs. However, a deductible of 5 % of the taxable net income is applied. 

Can we deduct fees for our daughter's private tuition and high school preparation course from our taxable income? 

Unfortunately not. The costs of initial schooling up to the upper secondary level are not deductible. Upper secondary level qualifications include the baccalaureate, specialized matriculation, federal certificate of vocational education and training, federal diploma of vocational education and training, and specialized school diploma.

Only the costs of professional training and continuing development (incl. retraining) are deductible, up to an amount of CHF 12,000. Professional training and continuing development refers to all training activities pursued by the taxpayer to further their professional advancement. It is therefore conditional on being able and willing to apply the knowhow so acquired to earning a living.

Tax evasion carries a fine of 100 % of the tax evaded. Depending on whether you acted negligently or intentionally, the penalty can be reduced or even increased by up to three times. Tax fraud is punishable by a fine or up to three years' imprisonment.

Stefanie Gugger, tax expert

I have taken out a new pillar 3 pension plan. Do I need to declare this on the tax return?

It depends on whether you took out a pillar 3a or 3b pension plan. 

Pillar 3a contributions can be deducted on your tax return up to the maximum annual amount stipulated. On the other hand, the assets accumulated do not have to be declared – they are exempt from wealth tax. Any income from the assets you have saved is also tax-free during the term of the plan.

In the case of pillar 3b insurance plans, it depends on what type of investment you have opted for (surrenderable insurance, pure risk insurance, or mixed policies). Different tax liability rules apply here. For example, contributions to surrenderable endowment insurance plans are not tax-deductible, and the surrender value is taxed as an asset during the plan term. On the other hand, the entire assets including all income are tax-free when paid out. Every year, the Swiss Federal Tax Administration publishes a list of the different insurance products as a help when completing the tax return.

We live in Wil and our daughters (13 and 15) attend the cantonal high school in St. Gallen. Can we deduct the cost of their general travel passes and learning materials on the tax return?

These expenses count as education and training costs and are not deductible. However, the general child deduction can be claimed for each child who is still a minor. The amount of this deduction varies from canton to canton. At direct federal tax level, it is CHF 6,500 per year and child.

Various cantons do though allow a special deduction for education and training costs at the cantonal and municipal tax level. In the canton of St. Gallen, for instance, a further CHF 13,000 on top of the regular child deduction is deductible for each child still at school or in vocational training, provided the taxpayer personally bears these costs and they amount to at least CHF 3,000 per year. Deductible self-paid training costs include, for example, term fees and expenses for books and lecture notes.

Do I have to declare my minor children's savings accounts on my tax return?

Yes, these accounts also have to be declared. For tax purposes, the accounts are treated as the parents' assets until the child has reached full legal age.

Can I deduct the cost of the parking space in front of my photocopy shop?

Yes and no. This is included in the deduction for travel between home and work under professional expenses.

I own several expensive watches and items of jewelry that I wear every day. Do I need to declare these valuables on the tax return?

In principle, household contents do not have to be declared. However, the Federal Tax Administration no longer counts items of expensive jewelry as part of the household contents, which means they have to be declared as assets. Besides expensive jewelry, this also applies, for example, to gold coins and valuable pictures. 

Since wealth tax is levied at cantonal level, rates may differ depending on the canton. 

These mistakes can lead to prosecution

We advise you to fill out your tax return very carefully, because even small mistakes or discrepancies can lead to prosecution. Negligence is also punishable.

These are the most common mistakes or cheats: 

  1. Not disclosing income/secondary earnings
  2. Not reporting home help
  3. Using workrooms as guest rooms
  4. Rounding up kilometers traveled to and from work
  5. Not declaring winnings from gambling 

Note: Winnings from Swiss casinos (not online) are tax-free, but they must still be declared on the tax return.

Our son has been attending a private school since last fall. Are the supervised lunches payable on top of the regular school fees tax-deductible – like the lunchtime care provided at public schools?

With regard to third-party supervision costs, no distinction is made between institutions under public law and private institutions. Only genuine third-party supervision costs are deductible. In other words, the cost of food and other support for your child count as living costs and so cannot be deducted. Childcare facilities usually also bill for such living costs, in particular meals, which is why the majority of cantons only permit a deduction of 75 % of the costs reported.

If your child not only takes their lunch at school, but is supervised in addition, at least a part of the costs can be deducted.

As a pensioner, how much can I earn tax-free?

Essentially, earned income is still taxable after reaching retirement age. Tax law does not provide for an exempt amount such as allowed under the AHV (OASI) system (CHF 1,400 per month or CHF 16,800 per year). 

In 2020, I was named as co-beneficiary of a will, but the inheritance has not yet been paid out and the amount is still not definite. How and when do I have to pay tax on this inheritance?

For as long as the inheritance has not been divided and paid out, you are part of a community of heirs. At the end of 2020, the community of heirs is required to draw up a statement of assets as at 31 December 2020 as well as income earned in 2020 since the deceased's death. You have to declare your percentage share in the inheritance. Some cantons require the community of heirs to file a separate tax return.  

We supported our daughter (29) financially over a period of three years while she was on a second degree course. Is this amount tax-deductible?

Education and training costs are normally claimed under the child deduction. However, you are only entitled to claim a child deduction for a child who is still in initial training and has not yet reached age 25.

I'm employed as a full-time journalist and won CHF 10,000 (incl. VAT) in a journalism competition. What is the procedure for paying tax on the prize money?

Neither the cantonal tax laws nor the Federal Act on Direct Federal Taxation contain express provisions on the tax treatment of prizes. In principle, all recurring and one-time income is subject to income tax unless explicitly exempted from taxation.

It can reasonably be assumed that you won the prize for a specific article and thus provided a service to the competition committee. Consequently, you are required to pay tax on the prize as income. 

As of what account balance am I required to report a foreign bank account? Is there a limit? 

Tax liability applies to the overall potential to earn. This means that global income and assets have to be declared on the tax return. Accordingly, there are no exempt amounts. Even a bank account with a zero balance needs to be declared for the sake of full disclosure. Especially in light of the Automatic Exchange of Information (AEOI), which requires that foreign bank accounts and life insurance policies are reported to the Swiss Federal Tax Administration, it is highly advisable to declare all accounts to the tax authority.

What I need to know in general about the tax return

Who is actually required to file a tax return?

Essentially, all natural persons who have reached age 18 and have their permanent or temporary residence or own a property in Switzerland are required to file a tax return. This also applies to anyone who is still in education or training (school/apprenticeship/studies) and only receives a small income or none at all.

Foreign employees whose permanent or temporary tax domicile is Switzerland but who do not hold a type C residence permit are taxed at source on income from employment and on substitute income. Provided their annual income does not exceed CHF 120,000 gross, they are not required to file a tax return. Once they go above this income threshold, they are also required to file a tax return (subsequent ordinary tax assessment). 

How long do I have to file the tax return?

In many cantons, the tax return must be submitted by March 31 of the following year. This deadline can be extended to the end of November or even December in most cantons. 

What happens if I miss the deadline for filing?

You will receive a reminder, and you may be required to pay a late filing penalty. Here too practice varies considerably from canton to canton. 

How can I get an extension on the deadline for filing the tax return?

By submitting a deadline extension request. Here as well, practice varies considerably among the individual cantons. The majority of cantons favor online deadline extensions via the website of the respective tax authority or by means of a QR code printed on the tax return form. Information about the different options can be found in the insert included with the tax return forms or on the tax authority's website.  

What happens if I don't file my tax return?

If, despite the reminder, you don't file a tax return, the tax authority will automatically assess you at their own discretion. They will also impose a fine on you for failure to meet procedural obligations.

If the tax amount stipulated is not paid, enforcement proceedings for the collection of tax liabilities will be initiated. In this connection, it must be borne in mind that the tax assessment carries the force of a definitive title to set aside an objection under debt collection legislation.

How long do I need to keep bank records, tax documents, etc.?

In principle, you should keep bank records and general tax documents for ten years. But there is no legal obligation to do so. In any event, it is advisable to keep records and documents until you receive the definitive tax assessment or estimate. We recommend you keep property documents for at least 20 years. In particular in the event of a sale, you will need to be able to furnish proof of all investment costs. 

What do I do if I am unable to sign my tax return myself – for instance, due to illness or because I'm away on a long trip? Do I need to assign power of attorney?

Unfortunately, power of attorney is not enough here. Tax law requires the taxpayer to sign personally. Having a contractually appointed representative (proxy) sign is not permissible. An exception is made in cases where it is impossible for the taxpayer to sign personally because they have lost the use of their hands due to illness or accident.

If the taxpayer is not of age or is under full or advisory guardianship, then the legal representative as the holder of parental responsibility, full guardian, or advisory guardian – provided the certificate of appointment to the advisory guardianship encompasses the right to represent the person under guardianship in administrative, financial, and legal matters or to assume full responsibility for the management of that person's assets – is required to sign the tax return in person on the taxpayer's behalf.

In the case of married partners to be assessed jointly, both spouses are required to sign the tax return in person. 

If the personal signature is missing on the tax return, the obligation to file a tax return will not be deemed to have been formally met. If the taxpayer fails to sign the tax return in person, they will be requested to provide the missing signature within a reasonable period. If the person required to sign does not sign despite being reminded to do so, they can be fined for a violation of procedural obligations. 

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