SWITZERLAND Law and Practice Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Caterina Colling-Russo, Tax Partner AG
1. Rules Governing Transfer Pricing 1.1 Statutes and Regulations Preliminary Remarks First of all, it should be noted, that Switzerland has no specific codified transfer pricing law. Consequently, there are no specific regulations regarding determination and documentation of transfer prices, neither at the federal level nor at the cantonal level. The arm’s length principle is, nevertheless, recognised and substantiated by the practice of the Swiss Federal Tax Administra - tion (SFTA) and case law. In addition, Switzerland has accepted the initial version and all updates of the OECD Transfer Pricing Guidelines (TPG) without reservation, including the latest update in 2023. Thus, there is full consensus in Swiss tax law practice that the OECD TPG are an impor - tant – although not binding – interpretative tool for the application of the arm’s length principle in Swiss tax law. The importance of the OECD TPG has been further underlined in several publica - tions made by the Swiss tax authorities, namely the SSK ( Schweizerische Steuerkonferenz ) and the SFTA regarding transfer pricing, as these publications strongly rely on and basically sum - marise the OECD TPG. Further, the SFTA pub - lishes and regularly updates a Q&A on specific transfer pricing topics. Mainly, transfer pricing issues arise in Switzer - land in connection with federal and cantonal cor - porate income tax and federal withholding tax (WHT). However, transfer pricing issues might also arise in connection with VAT – eg, in the event of retrospective transfer pricing adjust - ments and VAT impact at the level of the foreign related party. While, in the area of corporate income tax, the federal government (limited to a supervisory role) and the cantons have paral - lel competence, the federal government has the exclusive competence to levy withholding tax,
stamp duties and VAT. With regards to withhold - ing tax, in 2019 the SFTA established a compe - tence centre for transfer pricing. It is therefore no surprise that, in practice, for withholding tax purposes, transfer prices are increasingly being critically scrutinised during tax audits. This con - cerns, in particular, the relocation of functions abroad and controlled transactions between Swiss companies and related companies domi - ciled in tax havens or low-tax countries. In gen - eral, Swiss withholding tax implications may be a substantial concern as a result of a transfer pricing adjustment done in tax audits. OECD TPG In exercising its supervisory role over the can - tonal tax administrations, in 1997 and 2004 the SFTA instructed the cantonal tax administra - tions, through a circular letter, to directly apply the OECD TPG. The Federal Supreme Court (FSC) tends to apply a static approach regard - ing the version of the OECD TPG. This approach has recently been confirmed in an FSC ruling from 2024. Hence, the arm’s length principle and the methods for determining the relevant transfer prices will be assessed according to the OECD TPG as they were published at the time the transaction in question was settled. Statutes Corporate income tax From a corporate income tax perspective, the following two scenarios must be distinguished: • controlled transactions between a company and its shareholders; and • controlled transactions between a company and related parties, other than its sharehold - ers. The latter includes, in particular, transactions between group companies that are under the
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