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Helping you easily find everything you need to know about the rules and regulations regarding transfer pricing and Country by Country reporting for every country you do business with.
Global transfer pricing guide
Transfer pricing - Switzerland
01 Jan 20253 min read
This publication provides a high-level overview of Switzerland's transfer pricing rules and outlines who to contact for expert guidance in this area.
Contents
Introduction to transfer pricing in Switzerland
Switzerland has no formal transfer pricing legislation, although all related party transactions with Swiss entities must be carried out on arm’s length terms (Art. 58 Para. 1 lit. b lemma 5 of the Swiss corporate income tax act and Art. 4 Para. a letter b of the Swiss withholding tax act). Based on the circular letter number 4 dated 19 March 2004, the Swiss tax authorities emphasize that the OECD Guidelines are to be followed by multinational companies. Furthermore, there are administrative guidelines for financial transactions, specifically circular letters annually published by the Swiss federal tax authorities on safe harbour interest rates as well as a circular letter addressing thin capitalization.
In general, Switzerland follows the OECD Guidelines, except for interest rates on loans granted to or from shareholders or related parties.
All transfer pricing methodologies are accepted as per the OECD Transfer Pricing Guidelines.
If transfer prices are challenged by the Swiss tax authorities (e.g., tax audit), the taxpayer must provide supporting documents and information demonstrating sound economic and commercial reasons for related party transactions, and thus, that the arm’s length nature of transfer prices applied. Thus, it is strongly recommended to Swiss taxpayers to prepare and maintain an OECD compliant transfer pricing documentation defending all income and expenses from related party transactions well before this is requested by the Swiss tax authorities (i.e. self-assessment regime).
Transfer pricing documentation
There is no formal Swiss transfer pricing documentation requirement. However, a Swiss taxpayer has to prove its tax-deductible expenses whereas the Swiss tax authority has to prove adjustments increasing the taxable profit. If a taxpayer fails to prepare supporting documents, the burden of proof shifts to the taxpayer. If transfer prices are challenged by the Swiss tax authorities (e.g., tax audit), the taxpayer must provide supporting documents and information demonstrating sound economic and commercial reasons of related party transactions, and thus, the arm’s length nature of transfer prices applied.
To prove the arm’s length nature of intragroup transactions a transfer pricing documentation should be prepared. Thus, as per current Swiss transfer pricing practice, a Swiss tax-payer is well-advised, but not obliged to prepare a master and local file including benchmark study in line with OECD TP guidelines and Swiss practice.
A master file and the local country file must not be automatically filed with the Swiss federal tax authorities together with the Swiss corporate income tax return, but upon request of the Swiss tax authorities (i.e. in case of a tax assessment, tax audit, etc.).
The Swiss tax authorities are actively challenging transfer prices applied.
Transfer prices are reviewed as part of regular tax audits. They mainly focus on low-risk/low-profit companies of all industries as well as on structures involving offshore tax jurisdictions. Moreover, intellectual property transactions, intercompany financing as well as business restructurings are being challenged.
There are no formal transfer pricing penalties, but general tax penalty rules apply. However, transfer pricing adjustments may lead to potential liability for Swiss corporate income and withholding tax and may also have implications for Value Added Tax (VAT) and customs.
Economic analysis and how to demonstrate an arm’s length result
Benchmarks/ comparables must follow OECD transfer pricing guidelines.
Advance Pricing Agreements (APAs), dispute avoidance and resolution
There are no formal APA procedures, however, TP issues are normally ruled with the Swiss tax authorities (equivalent to unilateral APAs). Bilateral and multilateral APAs are available.
Exemptions
Any intercompany transaction must stand the arm’s length test. There are no thresholds or exemptions to the application of the transfer pricing rules.
Related developments
The Swiss tax authorities are actively challenging transfer prices applied. The Swiss tax authorities are constantly being trained in transfer pricing. There is a specific transfer pricing taskforce within the Swiss federal tax authorities and SIF.
Simplified, the SIF represents Switzerland’s interests in financial, monetary, and tax matters not only in dealings with partner countries but also within the relevant international organizations, thereby enhancing the Swiss tax authorities' expertise in transfer pricing. In particular, the SIF is responsible for negotiating multilateral advance rulings and mutual agreement procedures with partner countries.
Contact us
For further information on transfer pricing in Switzerland please contact:
