SWITZERLAND Law and Practice Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Caterina Colling-Russo, Tax Partner AG
9.3 Impact of the Base Erosion and Profit Shifting (BEPS) Project In general, the BEPS project had a major impact on the Swiss tax law landscape. Based on BEPS Action 5, Switzerland agreed to spontaneous - ly exchange certain tax rulings, and based on BEPS Action 13, to the exchange of country- by-country reports (see 6.1 Sharing Taxpayer Information ). Moreover, Switzerland abolished the administra - tive practices on Swiss finance branches and principal companies in 2019. The BEPS project raised the awareness of transfer pricing consid - erably, prompting the tax administrations – at cantonal and federal level – to address this issue more frequently and persistently (see 1.2 Cur- rent Regime and Recent Changes ). 9.4 Impact of BEPS 2.0 Switzerland is in favour of long-term, broad- based multilateral solutions instead of a multi- tude of (confusing) national measures. Thus, in principle, Switzerland supports the parameters of the discussed rules regarding the internation - al profit reallocation of large multinational enti - ties (MNEs) according to Pillar One as well as the minimum taxation global anti-base erosion (GloBE) rules according to Pillar Two, in order to restore legal certainty for countries and cor - Regarding Pillar One, Switzerland advocates that the interests of small, economically strong countries be taken into account in its implemen - tation. Although, in principle, Pillar One works in both directions, Switzerland exports much more than it imports, as it creates attractive location conditions for a wide range of industries while is itself a small but nevertheless important con - sumer market. porations. Pillar One
marks is to be excluded, thus being subject to ordinary taxation. According to the SFTA, it is not necessary to determine the income for routine activities and brand use by means of transfer pricing studies. Instead, for reasons of practi - cability, the law provides for fixed margins. For the income of routine functions, a mark-up of cost plus 6% is defined, and concerning the income of trade marks, as a rule of thumb, 1% of the turnover of the patent box is regarded as appropriate. However, the right to prove higher or lower income from trade marks based on the arm’s length principle is reserved. The law also provides for simplifications in con - nection with the notional interest deduction (only available in the canton of Zurich). The special feature of the Swiss notional interest deduction is that it is only possible on the so-called security equity. For this purpose, core and security equity must be determined in a first step. The law does not require the preparation of a transfer pricing study for this purpose. For reasons of practicability, the regulation rather provides for equity backing rates for the individual assets, following the circular on thin capitalisation and its inversed maximum safe haven debt capacity rates (for example, for inter - company loans, a minimum equity rate of 15% is required). If these rates are exceeded, there is security capital on which an imputed equity interest deduction can be claimed. In general, this interest is also not determined on the basis of the arm’s length principle. Rather, the law provides for the interest rate for ten-year federal bonds. However, to the extent the security capi - tal is attributable to receivables from related par - ties, an interest rate corresponding to the arm’s length principle may be applied.
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