Concubines and ex-partners, the taxman is watching your financial dealings

To love ❤️ and to separate 💔 doesn't only happen to married couples, but also to cohabiting couples.

During their time living together, the tax authorities generally leave cohabiting couples relatively alone, provided each partner contributes to the shared life they have formed (contractually a simple partnership).

👉 However, if there is a significant disparity in the contributions each partner makes to the partnership, the tax authorities may question whether there have been gifts between third parties, which are subject to sky-high tax rates (up to 54.61% in Geneva, 50.1% in the canton of Vaud, etc.).

In the event of a separation, maintenance contributions for children are not an issue. However, the maintenance contribution for the ex-partner is not recognised by the tax authorities as such and, therefore, not deductible from income tax as a maintenance contribution for the ex-spouse, because the ex-partners were never married. In parallel, this contribution should not be recognised as income by the ex-partner receiving it. If the ex-partners were previously subject to a foreign marital property regime – a foreign regime not recognised in Switzerland – this does not change the situation. In this case, the partners had drawn up an «official declaration of common-law partnership» before a Canadian official, which is not recognised in Switzerland.

🚨 🚨 🚨 The tax authorities might not stop at the non-deductibility of maintenance payments to an ex-spouse and consider that the maintenance payments made would correspond to a taxable gift at the (prohibitive) rate between third parties… 😱

This is a Neuchâtel case. The judgment is in French.

Federal Tribunal, judgment 9C_643/2023, of 15 November 2024