SWITZERLAND Trends and Developments Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Manuel Ulrich, Tax Partner AG
contractual terms, actual conduct, and the entity’s capacity to control and financially bear those risks. If a local entity is characterised as a limited-risk dis - tributor, assuming routine market and operational risks, it may be inappropriate for that entity to bear the full burden of unexpected tariff increases, especially where these are driven by geopolitical developments and cannot be passed on to customers. It may be a fair assumption that tax authorities in the countries in which the respective routine entity (limited risk dis - tributor) is domiciled may conclude that such tariff volatility exceeds what could reasonably be consid - ered a routine local market risk. Instead, abrupt and material tariff changes may be more closely aligned with strategic or regulatory risks. These risks are typi - cally managed at the level of the entrepreneurial entity, which decides on supply chain design, sourcing strat - egies and responses to trade policy developments. For many Swiss-based MNEs, this entrepreneurial entity is located in Switzerland. In such cases and following the aforementioned argument, consistent application of the OECD TPG would suggest that the Swiss principal should bear the residual tariff risk, potentially through price adjustments, rebates or other compensatory mechanisms. In contrast, tax authorities in the entrepreneur’s coun - try (ie, here Switzerland) may argue that such increased or volatile tariffs are derived from the local legislation in the routine entity’s/limited risk distributor’s coun - try and in consequence can be neither controlled nor impacted by the entrepreneurial (Swiss) entity at least over a short-term period, respectively in the existing supply chain. As a result, respective costs may be borne by the routine entity/limited risk distributor at least for such short-term period. In consequence, the tariff situation creates certain tension and possible tax as well as customs risks of which MNEs need to be aware to apply conscious decisions by considering and possibly mitigating those risks. Importantly – and to be considered by any measure – contractual frameworks must align with actual conduct – eg, intercompany agreements that allocate tariff risks to local entities may not be respect -
ed if those entities lack decision-making authority or financial capacity to manage such risks. Value chain adjustments and exit tax implications Persistent tariff volatility may prompt MNEs to recon - sider their value chain structures. Short-term respons - es may include temporary pricing adjustments or alternative sourcing, while long-term strategies may involve relocating manufacturing, changing distribu - tion models or restructuring principal arrangements. Under Chapter IX of the OECD TPG, such restructurings must be assessed to determine whether they involve a transfer of something of value. For Swiss-based MNEs, relocating functions or risks away from existing enti - ties – either into or out of Switzerland or into or out of the respective countries of its local operating entities – may affect profit potential, customer relationships, or other economically significant elements. If an entity is deprived of such profit potential without adequate compensation, exit taxation may arise. The distinction between short-term tactical adjustments and permanent structural changes is therefore essen - tial. Temporary tariff-driven losses do not automatically constitute a transfer of value. However, permanent real - location of functions, assets, or risks – especially when accompanied by contract terminations or amendments – requires careful assessment, valuation, documenta - tion and alignment with actual conduct. Conclusion For Swiss-based MNEs, the interaction between transfer pricing and customs valuation has become markedly more complex in a highly volatile tariff envi - ronment since 2025. Rapid and politically driven tariff changes, particularly in the United States, exacerbate existing tensions between tax and customs objectives and challenge established operational transfer pric - ing models. Proper delineation of transactions, robust allocation of risks and alignment between contracts and conduct are critical. In the longer term, tariff- driven value chain adjustments may have significant transfer pricing and exit tax implications. An integrat - ed, forward-looking approach that jointly considers transfer pricing, customs and business strategy is therefore indispensable for Swiss MNEs navigating this evolving landscape.
272 CHAMBERS.COM
Powered by FlippingBook