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9C_42/2024: The Court clarifies the rules applicable to tax reassessments against heirs.

In its judgment 9C_42/2024 of the 5th of December 2024, the Federal Supreme Court confirms the decision to refuse to apply the favorable simplified tax reassessment regime for heirs (10 years instead of 3 years if this regime had been accepted) to a taxpayer subject to a tax reassessment, on the grounds that this shorter reassessment period can only be applied in the event of an active denunciation by the taxpayer before the tax authorities become aware of the facts. In this case, however, the deceased’s tax evasion was discovered by the tax authorities, so the tax reassessment must cover 10 years.

Taxpayer B inherited a bank account from the late A, who died in 2020. This account had been credited with CHF 50’000 in 2012 and CHF 50’000 in 2015. These two payments undeniably constituted taxable income and were not declared by A. The existence of these payments was discovered by the tax authorities in 2021. It therefore issued a tax reassessment against B and taxed the income arising from these transfers. The taxpayer refers to art. 153a para. 2 LIFD (simplified tax reassessment for heirs) in order to take claim that such a reassessment is only possible in respect of items not declared by A during the three years preceding her death.

According to the Federal Court’s analysis, the taxpayer is under no obligation to file the declaration required for the simplified tax reassessment for heirs (art. 153a LIFD). As a special legal basis, prevailing over the ordinary tax reassessment, the simplified tax reassessment for heirs is intended to make up for the tax loss suffered by the tax administration by encouraging heirs to declare the sums evaded by deceased persons, offering them a favorable treatment if they do so.

Given the incentive nature of this provision, a taxpayer can only take advantage of the 3-year time limit for the simplified tax reassessment for heirs if he has spontaneously declared the undeclared assets of the deceased and if the tax authorities were not yet aware of those undeclared assets at the time of the denunciation.

The judgment underlines the importance of proactivity on the part of the heirs of a deceased person who has not declared all of his assets: by spontaneously reporting the case to the tax authorities before it is discovered, the heirs ensure that the reassessment will cover only 3 years, whereas if they do not do so, they run the risk that the tax authorities will discover the tax evasion themselves and reassess over 10 years (and in such case impose a reassessment against the heirs, with a fine, if the evasion also covers a period subsequent to the death).