SWITZERLAND Law and Practice Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Caterina Colling-Russo, Tax Partner AG
however, the fine is directly imposed on the person(s) responsible for the violation. At least in these cases, the fine is not determined based on the amount of tax evaded, but according to a fixed fine range. Documentation Obligations Swiss tax laws – apart from the Federal Act on the international automatic exchange of country- by-country reports of multinational groups – do not define specific documentation requirements with respect to transfer pricing. However, tax - payers must provide all documents necessary in order to enable the tax administration to conduct a proper assessment of the taxable base. This legal obligation is based on the principle that the taxpayer and the tax administration jointly deter - mine the relevant facts to ensure a complete and correct assessment as far as corporate income tax is concerned. In particular, taxpayers are obliged to provide the tax authorities with any information on transactions between associated companies upon request. As a consequence, despite the lack of specific documentation rules, taxpayers are strongly advised to have full and state-of-the-art transfer pricing documentation at hand that can, if requested by the tax admin - istration, be disclosed. This also includes inter - company agreements with respect to the con - trolled transactions. Such documentation will also be helpful in the defence of potential tax evasion charges. Such documentation should also include sound and updated benchmarking studies. In addition, it should be noted, that with regard to MAPs and APAs, the master and local file as well as any other relevant information for the resolution usually have to be presented by the taxpayer. If no appropriate transfer pricing documentation can be presented and the taxable base cannot therefore be properly determined, the tax admin -
istration might need to estimate the transfer pric - es. Even though that estimate has to be reason - able and based on experience, such estimates are rarely in favour of the taxpayer. Although such an estimate is not to be considered as a penalty, it still has to be taken into consideration as a potential negative impact. The reason for that is that the courts will reject such an estimate only if the taxpayer can demonstrate that the transfer prices set by the tax administration are obviously flawed or arbitrary. Penalty Relief Federal and cantonal Swiss tax laws provide for a one-time voluntary disclosure, which leads to a complete penalty relief if specific statutory conditions are met. Outside the voluntary dis - closure procedures, penalties charged are lower in the case of ordinary negligence and higher in the case of gross negligence. Collaboration with the tax administration in the course of a tax criminal investigation will usually result in a lower penalty. Regarding the question of culpa - bility, the importance of state-of-the-art transfer pricing documentation should be emphasised. If a company does have such documentation, it will be difficult for the tax administrations to substantiate culpability. However, as indicated above, many disputes can be prevented or set - tled by negotiations with the tax authorities dur - ing a tax assessment or tax audit process (by filing formal complaints). Back Taxes It is worth noting that criminally relevant viola - tions of the arm’s length principle may also trig - ger back taxes. This is the case if the tax admin - istration becomes aware of new facts or pieces of evidence that have not been disclosed to the tax administration with the tax return or during the ordinary tax assessment procedure. In order to levy back taxes, the tax administration can
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