Obligation to cooperate in the case of estimates of payments abroad

Payments abroad: taxable person is subject to obligation to cooperate.

Basically, facts that lead to an increase in tax are to be proved by the tax authorities and tax-reducing matters by the taxable person.

This Federal Court decision concerned a cash payment of CHF 37,000 a company to a German consultant. The tax office and the cantonal court at St. Gallen expressed considerable doubt as to the genuineness of the invoice submitted. This was particularly because the payment was reportedly made in cash.

The authorities asked the company to assist in investigating the facts. The company refused to assist. It argued that according to federal court practice, formally correct accounting is deemed to be also materially correct. It is therefore up to the authorities to provide proof.

The Federal Supreme Court agreed with both points. They did, however, argue that the tax authorities are restricted in their investigation opportunities when it comes to payments abroad. This is why the taxable person is under a particular obligation to cooperate in such cases. This person needs to prove who the recipient of the payment is and submit contracts and correspondence. Otherwise the amount will be added to earnings for lack of sufficient evidence of the expense. (2C_1113/2018 dated 8.1.2019)