SWITZERLAND Law and Practice Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Manuel Ulrich, Tax Partner AG
12. Co-Ordination With Customs Valuation 12.1 Co-Ordination Requirements Between Transfer Pricing and Customs Valuation Switzerland levies VAT on imported goods (import tax) of 8.1%, where the tax is assessed on the respective consideration. The import tax is levied by the Federal Customs Administration, which acts, like the SFTA, as an independent administrative body of the federal government. Despite the fact that the SFTA and the Federal Cus - toms Administration act independently, the admin - istrations are entitled and encouraged to exchange relevant information between themselves and with other interested administrative bodies. The informa - tion exchange has massively increased within the past couple of years, which is mostly due to improved elec - tronic systems, allowing a comprehensive and steady data flow. Hence, transfer pricing adjustments should always be considered for import tax purposes, as well. Regarding customs duty, no adjustment is generally required as the customs duty itself is based on weight and not on monetary value. It is to be noted that Swit - zerland has abolished levying customs duty on indus - try products as of 1 January 2024. 13. Controversy Process 13.1 Options and Requirements in Transfer Pricing Controversies General Transfer pricing issues can generally be raised by the tax administration in the course of ordinary tax assessments or in the course of audits. For the trans - fer pricing controversy process, whether a cantonal tax administration or the SFTA raised the issue of transfer pricing has to be differentiated. While the can - tonal tax administrations raise this issue in the context of corporate income tax, the SFTA may also challenge transfer pricing with regard to withholding tax, stamp duty or VAT. As will be shown, taxpayers may challenge the results of a tax assessment or of an audit in an administra -
tive objection proceeding before bringing the case to court. As regards the selection of the courts, the taxpayer does not have options since the competent courts are determined by law. Corporate Income Tax Transfer pricing adjustments affecting corporate income tax have to be discussed with the cantonal tax administrations, as they are the competent authorities to assess and levy corporate income tax at cantonal and federal level. If a tax administration has already issued an assessment or a decision, a formal objec - tion can be lodged with the tax administration itself within 30 days. The tax administration will then have to evaluate the material objections and render a new decision. The tax administration’s second decision can be appealed before court, again within a 30-day deadline. Generally, each canton provides two judicial instanc - es; though, typically, smaller cantons only establish one judicial instance. Once the highest cantonal court has rendered its decision, an appeal with the FSC can be lodged, also within 30 days. In contrast to the cantonal instanc - es, the FSC will only deal with questions concern - ing the correct application of the law, which includes the application of the OECD TPG as soft law. Issues concerning the facts will only be dealt with if the facts were arbitrarily established. In the context of transfer pricing, it is worth noting that the choice of the transfer pricing method and its correct application is a ques - tion of law, whereas the result is considered a factual question. Hence, regarding the determination of the arm’s length remuneration, the FSC can only intervene if the remuneration appears arbitrary. The disputed tax needs to be paid irrespective of the fact of appealing a decision or moving the case for - ward into court. If the appeal/objection is successful, the tax already paid will be paid back, with interest. However, the FSC clarified that the tax administration is not entitled to enforce the disputed tax amount as long as the controversy has not been decided with legal effect. Nevertheless, the tax authority may request a freezing order at any time, even before the tax amount has been legally determined, if the
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