SWITZERLAND Law and Practice Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Manuel Ulrich, Tax Partner AG
15.3 Effects of Other Countries’ Legal Restrictions Switzerland does not have specific rules regarding the effects of other countries’ legal restrictions. In the event that a foreign entity is affected by an adjustment of a payment to a Swiss entity due to such restrictions, a double taxation is most likely to be incurred. However, Swiss tax authorities may prevent a double taxation with unilateral measures if they agree to the reason and extent of the correction. Otherwise, a MAP would need to be initiated if a double taxation agree - ment is applicable. 16. Transparency and Confidentiality 16.1 Publication of Information on APAs or Transfer Pricing Audit Outcomes In Switzerland, taxpayer information is kept strictly confidential. Thus, results from APAs and transfer pricing audits are not published. However, it is to be noted that court rulings (excluding the reasoning) are made publicly available at the court for 30 days, whereby the names are generally not redacted. The FAC, as an exception, also redacts the names during the temporary public disclosure. After the public disclosure, rulings are published online with the names redacted. Despite the redactions, it cannot be excluded that from the other pieces of information of the decision, the party concerned can be identified. Outside of the administrative procedure, tax secrecy is therefore not guaranteed. 16.2 Use of “Secret Comparables” In principle, Switzerland adheres to the OECD TPG and follows the principle according to which the tax administration is prohibited from basing transfer pric - ing adjustments on secret comparables.
shift in view as to whether a payment is commercially justified, or instead constitutes a hidden profit distri - bution, is a legal requalification and does not qualify as a “new fact”. Accordingly, where the licence arrangement and the group relationship were disclosed, or at least readily ascertainable, the authorities cannot reopen closed years merely because they later take a more critical view of the royalty model. 15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions Switzerland does not have any specific rules or even restrictions regarding uncontrolled outbound transac - tions. 15.2 Restrictions on Outbound Payments Relating to Controlled Transactions Switzerland does not have any specific rules or even restrictions regarding controlled outbound transac - tions. However, as for all transactions, the payments have to be commercially justified in order to be effectively deductible for corporate income tax purposes. Fur - thermore, according to the FSC, a “particularly quali - fied” duty to co-operate with the tax authorities in the case of cross-border legal relationships has to be taken into account. This increased duty especially applies to outbound payments to a non-DTA foreign country or to a DTA foreign country to the extent that the DTA does not yet meet the current OECD standard on information exchange. The reasoning is that the circumstances of the foreign recipient are beyond the control of the domestic tax authorities.
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