SWITZERLAND Law and Practice Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Manuel Ulrich, Tax Partner AG
The taxpayer does not have any right to have such a reference included in the mutual agreement – this depends on the circumstances of the individual case. In particular, the levying of withholding tax is not waived in obvious cases of profit shifting. Also, such reference is excluded in case of tax audits performed by the SFTA. Repatriation payments are repatriations of profits that have been adjusted by a tax administration between associated enterprises that are parties to a transac - tion. They are used to reconcile the commercial bal - ance sheet with the tax balance sheet resulting from the adjustment. These are not mandatory under treaty law or domestic law. In application of Article 18 paragraph 4 of the Federal Act on the Implementation of International Tax Agree - ments (ITAIA), repatriation payments are not consid - ered to be hidden profit distributions as defined in Arti - cle 4 paragraph 1 letter b of the Withholding Tax Act (WTA) and are not subject to withholding tax, provided they are carried out in accordance with the results of a MAP or an internal agreement concluded on the basis of Article 16 of the ITAIA. In contrast, in the absence of a MAP or an internal agreement, withholding tax is lev - ied on the payments made for repatriation purposes. 6. Cross-Border Information Sharing 6.1 Sharing Taxpayer Information Exchange of Information on Request In 2009, Switzerland committed to the internationally agreed standard regarding the exchange of informa - tion on request. By doing so, Switzerland renewed most of its more than 100 DTAs. Moreover, in 2016, Switzerland ratified the Multilat - eral Convention on Mutual Administrative Assistance in Tax Matters, extending the network of jurisdictions for exchange of information even further. Switzerland has implemented the legal basis for exchange of infor - mation on request with around 140 jurisdictions. In addition, Switzerland has signed ten tax information exchange agreements.
Under current law, administrative assistance may only be provided if the requesting state demonstrates in its request that the information requested is foreseeably relevant and confirms that it will treat the requested information confidentially. Administrative assistance may be refused if the information is to be used for tax - ation contrary to the DTA or if the requested informa - tion could not be obtained by the Swiss tax authorities under domestic tax procedural law. Practice shows that foreign tax authorities are increas - ingly submitting requests for administrative assis - tance to Switzerland when auditing transfer prices, thereby requesting very comprehensive information and data. In this context, the Federal Tax Court (FTC) has – correctly in itself – decided that requested infor - mation for the verification of transfer prices must be exchanged. In doing so, the FTC referred in particu - lar to the explanations of the OECD TPG in Chapter V regarding documentation (in the 2010 version). At the same time, the FTC stated that the OECD TPG are not binding for the court and merely represent an interpretative instrument. This means in the context of international exchange of information in tax mat - ters that the provision of administrative assistance is not limited to the information required to apply a specific transfer pricing method. It is sufficient that there is merely a reasonable connection between the information requested and the facts described in the request for administrative assistance. As a result, the administrative assistance provided by Switzerland in transfer pricing cases can be very comprehensive and information is also transmitted that would not be required for the application of the methods defined in the OECD TPG. Spontaneous Exchange of Information on Specific Tax Rulings Switzerland has implemented the spontaneous exchange of information on tax rulings into domestic law as of 1 January 2017. In particular, it has also committed to the spontaneous exchange of unilateral rulings on transfer pricing and permanent establish - ments with the state of the direct parent, the state of the group top company and, if available, the state of the counterparty of the transaction.
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