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In January 2024, the Federal Tax Administration (“FTA”) published a review of the legislation concerning transfer pricing in Switzerland. This reminder of the regulations is appropriate since, unlike other OECD member states, Switzerland has not transposed into domestic law the provisions of the OECD principles applicable to transfer pricing.
This update serves as a reminder that although Switzerland has not integrated specific rules on transfer pricing documentation, the OECD Country-by-Country Reporting (“CbCR”) form is the only mandatory transfer pricing documentation. Switzerland thus strengthens its recognition of the minimum standards of Action 13 of the OECD BEPS[1] project for the automatic exchange of information with other countries and complies with international standards aimed at increasing transparency and fighting against base erosion and profit shifting.
It should be noted that for groups whose parent company is taxable in Switzerland and which have a turnover exceeding CHF 900 million, the notification obligations must be respected and the group must file the CbCR form, which requires an in-depth understanding of reporting rules and mechanisms, a task for which the expertise of a transfer pricing specialist is often required.
Also, even if no documentation other than the CbCR is mandatory in Switzerland, it is expected that upon request from the competent tax authority, taxpayers must be able to provide all the information and documents necessary for taxation. It is therefore important for entities involved in transfer pricing issues to maintain up-to-date documentation that is robust and complies with arm's length principles, even in the absence of formal legislative requirements. Taxpayers must therefore be prepared to demonstrate that their inter-company transactions respect the arm's length principle, which may again involve calling on transfer pricing specialists to prepare the appropriate documentation.
Submitting rulings to tax authorities is common practice in Switzerland and provides an opportunity for companies to clarify in advance the tax treatment of complex or significant transfer pricing transactions. The use of rulings can help prevent tax disputes and secure the company's tax position. However, navigating the rulings process requires expert knowledge of Swiss tax rules and transfer pricing principles.
Although Switzerland does not have a regulatory framework regarding transfer pricing that is as detailed as some other countries, the application of arm's length principles requires a certain vigilance and specific expertise. Multinational groups and entrepreneurs facing these issues should not hesitate to consider assistance in effectively navigating these complex tax waters, in order to avoid potentially onerous tax adjustments and maximize their company's tax compliance.
