Are the costs of a voluntary disclosure deductible as income-related expenses?

Between 2010 and 2014, over 100,000 voluntary disclosures regarding undeclared capital income from Switzerland were submitted. Those affected by voluntary disclosure face two issues: firstly, the conditions for the effectiveness of immunity from prosecution are extremely complicated (see Uli Hoeneß), and secondly, the costs for the voluntary disclosure, i.e., for obtaining documents and for the tax advisor, are extraordinarily high.

The question is whether the high costs can be deducted as income-related expenses for income from capital assets.

• In principle, since the introduction of the withholding tax in 2009: Expenses related to capital income can no longer be deducted as income-related expenses for income from capital assets upon proof. All expenses are covered by the saver’s allowance. According to the tax authorities, the prohibition on deduction should also apply if the expenses are related to capital income from years before 2009 (BMF letter dated 9.10.2012, BStBl. 2012 I p. 953, para. 322).

The Federal Fiscal Court has confirmed that tax consultancy costs in connection with a voluntary disclosure for capital income from 2002 to 2008 cannot be deducted as income-related expenses in 2010. Although the costs for the tax advisor are income-related expenses for income from capital assets, they can no longer be deducted as such from 2009 onwards. Only a saver’s allowance of 801 Euro is now taken into account (BFH ruling of 2.12.2014, VIII R 34/13).