Tax Newsletter Central Switzerland

Tax relief for various DTA countries 

The State Secretariat for International Financial Matters updated the overview of tax relief relating to the DTA with Bangladesh, India, Mongolia, Singapore and Vietnam on 19 August 2024. Further information can be found under the following link.

Administrative assistance under FATCA: group requests 

On 7 August 2024, the Federal Tax Administration (FTA) announced the receipt of group requests in accordance with Art. 12 No. 1 of the FATCA Act. Further information can be found under the following link.

DTT Switzerland – Hungary: protocol of amendment 

On 12 July 2024, a protocol of amendment to the treaty for the avoidance of double taxation with respect to taxes on income and capital (DTT) signed between Switzerland and Hungary was signed in Budapest. The protocol implements the minimum standards for double taxation treaties and contains, among other things, an abuse clause designed to prevent a person who is neither resident in Switzerland nor Hungary from taking advantage of the benefits provided for in the DTT. Further information can be found under the following link.

Switzerland – USA: FATCA agreement 

On 27 June 2024, Switzerland and the USA signed a new FATCA agreement. Until now, Switzerland unilaterally provided information on financial accounts to the USA. In the future, the USA will also provide corresponding information to Switzerland as part of an automatic exchange of information. The changes are expected to come into force from 2027. Further information can be found under the following link.

DTT Switzerland – Germany: amending protocol

On 14 June 2024, the Federal Council adopted the message on the amending protocol to the double taxation treaty (DTT) with Germany. In addition to various adjustments to the changed needs of the contracting states, the protocol also includes an implementation of the minimum standards from the Base Erosion and Profit Shifting (BEPS) project in matters of DTT. Further information can be found under the following link.

Switzerland – UK: agreement on mutual recognition in the area of financial services 

At its meeting on 4 September 2024, the Federal Council adopted the message approving an agreement between Switzerland and the United Kingdom (UK) on mutual recognition in the area of financial services. The agreement will strengthen and promote competitiveness and cooperation between the two major international financial centres. Further information can be found under the following link.

International tax news

For ongoing updates from the international tax world, we recommend our international tax news, which you can access under this link.

OECD minimum taxation (pillar 2) 

During its meeting on 4 September 2024, the Swiss Federal Council decided to introduce the Income Inclusion Rule (IIR) in Switzerland effective as per 1 January 2025. This IIR will complement the Swiss domestic top-up tax already introduced with effect as per 2024. The main reason for the implementation of the IIR rule is to protect Swiss headquartered groups in scope of pillar 2 from other countries (particularly EU member states, UK, Canada, Australia, etc.) that would otherwise start to apply UTPR with effect as per 1 January 2025.

The Swiss Federal Council also decided in the same meeting NOT to introduce an undertaxed profits rule (UTPR) in Switzerland for the time being.

The full press release of the Swiss government with additional details can be found here.

Transitional solution for the too-big-to-fail instruments for the withholding tax 

On 21 August 2024, the Federal Council approved a temporary extension of the special regulations for interest from TBTF instruments until 31 December 2031. Without an additional extension, interest on TBTF instruments issued after 31 December 2026 would be subject to withholding tax. The exemption provisions ensure that banks can issue from Switzerland on competitive terms. Further information is available under the following link.

Wealth tax of individuals

The SFTA has published an updated version of the article Wealth tax of individuals. The article can be found under this link (not available in English).

Real estate tax

The SFTA has published an updated version of the article Real estate tax. The article can be found under this link (not available in English).

Interest rates/maximum deductions for pillar 3a for direct federal tax

From 1 January 2025, an interest rate of 4.5% will apply in the event of late payments and for refunds. The interest rate on voluntary advance payments is now 0.75%. The tax deduction in 2025 within the framework of tied self-provision (pillar 3a) is CHF 7,258 (with 2nd pillar) or CHF 36,288 (without 2nd pillar). The details can be found under the following link (not available in English).

Adjustment of tax rates and deductions to inflation 

To offset the effects of bracket creep, the Federal Department of Finance (FDF) adjusts the rates and deductions for direct federal taxes annually. The latest changes affect the 2025 tax year. The details can be found under the following link.

Circular letter ‘Flat-rate professional expenses and benefits in kind 2025 / Compensation for the consequences of the cold progression in direct federal tax for the 2025 tax year’ 

The SFTA has published the circular ‘Flat-rate professional expenses and benefits in kind 2025 / Compensation for the consequences of the cold progression in direct federal tax for the 2025 tax year’. The details can be found under the following link (not available in English).

Notice on withholding tax: declaration of reserves from capital contributions 

The SFTA has published a clarification of the administrative practice in accordance with point 9 of circular no. 29c of the Federal Tax Administration (SFTA) on the capital contribution principle of 23 December 2022 (KS 29c) on the declaration of reserves from capital contributions (KER) in accordance with Article 5 paragraph 1bisff.  of the Federal Act of 13 October 1965 on withholding tax (Withholding Tax Act, VStG; SR 642.21). The clarification can be found under the following link (not available in English).

Entry into force of changes to laws and regulations in tax law for the years 2025–2028 

The SFTA has updated the lists of changes to laws and regulations in the area of direct federal tax, value added tax, withholding tax and stamp duties. The list contains changes to decrees in tax and duties law in which the SFTA is significantly involved or for whose implementation it is responsible. The list can be found under the following link (not available in English).

Teleworking in international relations 

The Federal Council has adopted the message. This is intended to create the domestic legal basis for taxing cross-border commuters even if they telework for a Swiss employer from their country of residence. There are already two cases of application with France and Italy.   

Tonnage tax

The National Council approved the bill in the 2022 winter session. Shipping activities are to be taxed according to the loading capacity of the ships, as is the case in many other countries. The Council of States has now dealt with the Federal Council’s message on the federal law on tonnage tax and has not taken up the bill. The matter will therefore go back to the National Council as part of the reconciliation of differences.

Intercompany financing

Intragroup financing agreements are increasingly the focus of various tax authorities and current case law (see, for example, the recent decision of the Swiss Federal Supreme Court dated 17 July 2024). Besides the recent publication of official guidance which deals with selected transfer pricing aspects (i.e. the Transfer Pricing article published by the SFTA/SSK and also the new Transfer Pricing web page and Q&A published by the SFTA) we have also experienced an increased focus on intercompany financing arrangements being challenged during tax audits.

Tax law revision 2025 – Canton of Lucerne 

On 22 September 2024, voters in the Canton of Lucerne approved the revision of the 2025 tax law with 66.9%. The tax law revision will provide tax relief for natural persons with low incomes, child deductions will be made easier and increased, and taxes on capital payments from insurance and pension benefits will be reduced. Legal entities benefit from the reduction in capital tax in two steps and the relief of profit tax for patents. In addition, the government council can introduce a tax deduction for research and development expenses. 

New tax values for real estate – Canton of Zurich 

As real estate values have risen sharply in recent years, the government council is adapting the directive on the valuation of real estate and the imputed rental value to the current situation based on two court decisions (the new directive will come into force on 1 January 2026). A legal basis for the reintroduction of a hardship regulation is also to be created. The revised directive will lead to an increase in property tax values by an average of 48%. The imputed rental values will increase by an average of 11% for single-family homes and by an average of 10% for condominiums. Further information can be found under the following link (only available in German).

Current case law

Enclosed you will find a selection of the Swiss Federal Court (SFC) that may be of interest to you: 

• SFC dated 17 March 2023: The income tax-free repayment of capital contributions must not depend on whether the capital contributions are booked in a separate account. The SFTA only applies this ruling to liquidation cases.
• SFC dated 3 July 2024: Provisions for unused employee holidays. The Swiss Federal Supreme Court examined the tax deductibility of provisions booked for the carryover of unused employee holidays. In this short decision, the court ruled against the tax deductibility of such provisions, concluding that they constitute hidden reserves covering future costs.
• SFC dated 17 July 2024: Binding to ‘safe harbour’ interest rates. The tax authorities must generally adhere to the safe harbour interest rates. However, this can only apply as long as the taxpayer themself adheres to them and does not agree to interest rates that are higher than the maximum interest rates for lenders in these circulars. If they deviate from this and are unable to prove that the agreed interest rate is in line with the third-party comparison, there is no apparent reason why the tax authority should continue to be bound by this and not be allowed to provide evidence of third-party comparison compliance and set a market-compliant interest rate that deviates from the safe harbour interest rates. 

PwC Newsletter 

We hope that this newsletter contains some topics of interest to you. If you have any questions, please do not hesitate to contact us. For ongoing updates from the world of tax, we also recommend our personalised newsletter, for which you can register using the following link.

VAT

New e-commerce VAT rules in Switzerland as of 2025 – ‘deemed supplier concept’ for platforms

Current situation

Suppliers selling goods to Switzerland from abroad via an online platform have to register for VAT and charge VAT on the subsequent supplies if their annual turnover from low-value consignments (VAT amount < CHF 5) exceeds CHF 100,000. There are currently no VAT implications for platforms.

Changes as of 2025

The ‘deemed supplier concept’ will be introduced for cross-border AND domestic supplies – two separate transactions will be deemed to have taken place under certain conditions: 

1. Supply from the supplier to the platform – without CH VAT:
           a. Domestic supplies: VAT exempt (with input VAT deduction              right) 
           b.  Cross-border supplies to CH: place of supply abroad, no VAT 
   
   
2. Supply from the platform to the end customer:            
           a.  Domestic supplies: subject to Swiss VAT 
           b.  Cross-border supplies to CH: import VAT (generally) + Swiss VAT               (8.1% / 2.6%) on B2B and B2C supplies

Resulting VAT implications for the platform as of 2025

The platform is obliged to register for VAT if the platform’s turnover from low-value consignments from abroad exceeds CHF 100,000 per year (or in the case of local supplies in CH, if worldwide turnover exceeds CHF 100,000 per year). 

If turnover from low-value consignments from abroad exceeds CHF 100,000 per year: 

• The place of supply performed by the platform is deemed to be in Switzerland.
• All subsequent supplies of goods from abroad to end customers in Switzerland, regardless of value, are subject to Swiss VAT, i.e. the platform will generally act as the importer of record and charge Swiss VAT to Swiss customers (even if no import VAT was due for the low-value consignments in question). 

The end result of this is that the obligation to register for VAT is shifted from the supplier to the platform.

Who is impacted?

• Local and foreign electronic platforms as deemed suppliers
• Local and foreign suppliers performing sales to end customers in Switzerland via an electronic platform

Additional implications

• Subsidiary liability for sellers: Suppliers are still subject to subsidiary liability together with the platform for the deemed supplies made by the platform.
• Obligation for platform to disclose information to the Swiss tax authorities about the sellers operating on the platform as well as the products offered.
• Administrative measures are possible in cases of non-compliance, such as import bans or even the destruction of goods in severe cases. Additionally, the names of non-compliant companies may be made public in order to protect customers.

Recommended immediate actions

• Assess the VAT implications and validate VAT registration obligations in Switzerland. 
• Review your agreements and general terms and conditions, taking into account the new subsidiary liability, the obligation for platforms to disclose information and other relevant obligations.
• Prepare your ERP system considering the necessary changes in invoice processing and layout, as well as compliance processes. 
• Align with your suppliers, customers and logistics service providers to agree on any potential changes in procedures. 
• Ensure awareness of the new rules within your organisation.

PwC is happy to support you on this journey. For further information, please see here.

VAT returns must be filed online as of 1 January 2025

Starting from 1 January 2025, all VAT-liable companies must settle their VAT online via the ePortal. The VAT return form can no longer be ordered on paper. This must be done through the ePortal using either VAT declaration pro or VAT declaration easy. The ePortal allows for easier communication with tax authorities and faster processing of applications.

From 1 January 2025, the following requirements will be introduced: 

• Electronic VAT registration applications 
• E-filing of VAT returns 
• E-filing of VAT correction returns 

Taxpayers may apply for a one-year transition period from paper to electronic filing or communications. 

New regulations for tour operators

From 1 January 2025, travel services resold by domestic and foreign travel agencies and their associated services will be exempt from VAT. Input VAT deduction for these transactions will therefore no longer be possible. A voluntary taxation for these transactions is possible. 

Introduction of voluntary annual reporting 

With the partial revision of the Swiss VAT Act, which will come into force on 1 January 2025, the tax administration has introduced the option of annual VAT reporting upon request.

Authorisation for annual reporting will be granted if the taxable person:

a. has not made any taxable transactions of more than CHF 5,005,000 in the previous tax period, and

b. in the last three tax periods or, if the tax liability exists for a shorter period, has submitted all VAT returns on time since the start of the tax liability and has paid the VAT due in full and on time.

The application must be submitted no later than 60 days after the start of the tax period from which the change is to take place.

The tax administration will determine four advance payment instalments to be paid to the tax administration during the year based on the tax claim from the previous tax period. One instalment amounts to a quarter of the previous year’s tax liability. The instalments paid are offset against the tax claim according to the submitted annual VAT return. In the event of an overpayment, the credit will be paid out.

Introduction of new tax exemptions and simplifications

In August 2024, the Federal Council put the partial revision of the Value Added Tax Act (VAT Act), passed by Parliament in June 2023, into effect from 1 January 2025. At the same time, the partially revised Value Added Tax Ordinance (VAT Ordinance) will also come into force.

The following tax reductions, exemptions and simplifications will come into effect, among others:

• Reduced rate for menstrual hygiene products
• Tax exemption for the use of infrastructure in day hospitals and outpatient clinics by attending physicians
• Tax exemption for managed care services, including purely administrative services
• Tax exemption also for profit-oriented home care services
• Tax exemption for participation fees at cultural events
• Tax exemption for occupational pension fund investment foundations (‘BVG-Anlagestiftungen’)
• Tax exemption also for foundations and institutions that have been established or are run exclusively by public authorities

Public authorities – subsidies: 

• Subsidies provided by public authorities should not be subject to value-added tax if they are provided to fulfil essential statutory tasks.
• If a public authority expressly designates funds that it pays to the recipient as a subsidy or as another public law contribution, these funds shall be deemed to be a subsidy or another public law contribution for value-added tax purposes.

Adjustments to the regulations in the area of net tax rates

The revision of the VAT Act entails a large number of changes in the area of net tax rates, which will come into force on 1 January 2025, including:

• Adjustment of the turnover limit from CHF 5,005,000 to CHF 5,024,000 and the VAT limit from CHF 103,000 to CHF 108,000.
• More than two net tax rates may be used. A net tax rate may be applied for any activity that accounts for more than 10% of the total turnover from taxable services. 
• When changing from the net tax rate method to the effective reporting method, a subsequent input tax deduction (additional input tax deduction) can be claimed. At the same time, when changing from the effective accounting method to the net tax method, own-use taxation (partial repayment of input tax) must be applied.

Customs

Updated roadmap for Passar 2.0 and 3.0 released

The Federal Office for Customs and Border Security has released the updated roadmap for the rollout of Passar, the new IT system replacing e-dec and digitising paper forms. The roadmap confirms the transition deadline for Passar 1.0 and outlines the postponed timelines for Passar 2.0 (previously 2.1 and 2.2) and 3.0 (previously 2.3).

Key deadlines and phases:

• Passar 1.0 (Exports): The transition from e-dec Export to Passar must be completed by 31 December 2025.
• Passar 2.0 (Imports: all e-dec Import functionalities): The switch from e-dec Import to Passar begins with a pilot phase in Q2 2026, with the full transition ending in Q2 2027, officially retiring e-dec Import.
• Passar 3.0 (Monitored procedures and remaining paper forms): The digitisation of remaining paper-based procedures, such as temporary admissions, will begin in Q2 2027.

It is crucial for businesses to stay informed about these changes and the timeline, particularly for those using e-dec Export, as the 31 December 2025 deadline for the switch to Passar is fast approaching. To ensure compliance and leverage the benefits of the new system, companies are encouraged to review their internal processes and coordinate with software providers to align with Passar requirements.

Staying informed about these updates and making necessary system upgrades will be essential for ensuring a smooth transition and maintaining efficient customs operations with the new Passar system.

New obligations for EU imports to register their goods potentially subject to anti-dumping or anti-subsidy investigation measures

The European Commission recently decided that the customs authorities will now register all imports of products under anti-dumping or anti-subsidy investigations, including ongoing investigations where provisional determinations have not yet been made.  

Regulations explaining how it will work in practice will be published by the European Commission in due course, but it can already be seen that the new import registration requirements carry several important implications for businesses: 

1. Automatic registration: Unlike the previous system where imports were registered only upon a justified request from the EU industry, the new policy mandates automatic registration of all imports under investigation. This change aims to streamline the process and reduce the administrative burden on industries, ensuring a more efficient and transparent system. 
2. Enhanced data collection: The registration process will enable the European Commission to gather detailed information about the source and quantities of imports, as well as broader market trends. This data is crucial for making informed decisions and implementing effective trade defence measures. 
3. Potential for retroactive duties: One of the most significant aspects of the new measure is the possibility of retroactively collecting anti-dumping and countervailing duties if the legal conditions are met. This means that businesses could face additional financial liabilities for past imports if investigations conclude that unfair trade practices were involved. 

For businesses importing goods into the European Union, it is now more important than ever to ensure compliance with a range of regulations and to stay informed about ongoing investigations. The companies now also need to monitor ongoing proceedings and analyse whether the European Commission has recently initiated proceedings for similar goods. These proceedings could result in the imposition of additional duties with retroactive effect, making it crucial to stay informed and prepared. 

In this regard, the importance of accurate tariff classification, origin determination and customs value of imported goods cannot be overstated. These factors will ultimately influence whether additional anti-dumping duties can be charged after the importation of goods. 

The European Commission’s new measures on import registration represent a significant shift in trade defence strategy. For businesses importing to the EU, staying informed and compliant is crucial to avoid potential financial liabilities and to maintain a competitive edge in the market. 

Pharma VAT recovery for rebates granted under KVV Art. 71a: a smart business move for you

Pharmaceutical companies selling drugs listed on the Speciality List (SL) in Switzerland have the opportunity to gain a valuable VAT benefit that could significantly enhance their financial standing. The reason for this opportunity is a recent shift in the approach of health and/or disability insurers regarding the rebates required under Swiss law (KVV Article 71a).

Previously, pharmaceutical companies had to grant rebates for Specialty List (SL) medicines under KVV Art. 71a if those drugs had been used in special cases; the price had to be below the price listed on the SL with no further stipulation in the law.  

Non-SL drugs (which typically are not reimbursed by the health insurance) are reimbursed in special cases under KVV Art. 71b; the prices in those cases were subject to negotiation between the health insurance and the pharmaceutical company. Rebates in those cases were not obligatory, but often agreed upon in the negotiations.  

The partial revision of the KVV which went into force on 1 January 2024 now requires pharmaceutical companies to grant a set percentage of rebate on drugs reimbursed in special cases, and regardless of whether those drugs are listed in the SL or not, the same rebates apply for both SL and non-SL drugs.   

Until recently, these rebates were usually issued with VAT on the credit notes, but recently, many insurers have requested the credit notes to be issued without VAT, to avoid any VAT risk on their side.  

This change implies that pharmaceutical companies may have inadvertently had VAT on these rebates in the past that can be claimed back. The good news is that such overpaid VAT amounts can be reclaimed from the Swiss VAT authorities, provided that a VAT ruling confirming this option is in place. We’ve been instrumental in assisting numerous pharmaceutical clients in securing these rulings, enabling them to recoup substantial VAT sums spanning the past five years.

A comprehensive exploration of the KVV Art. 71a to c revision from a tax perspective can be found in our recent blog post.

Our Swiss pharma regulatory and indirect tax experts are looking forward to discussing VAT refund opportunities together with you. 

E-Invoicing

France

A new decree has been published on plans for the delayed rollout of French mandatory e-invoicing and B2C e-reporting. 

The rollout plan is now as follows:

• 2025 – large-scale pilot
• September 2026 – all businesses must be able to accept e-invoices. B2B e-invoicing and e-reporting for large- and medium-sized companies (more than 250 employees, and exceeding either of the following: EUR 50 million turnover or EUR 43 million balance sheet) with an option to extend by a further three months to December 2026, and
• September 2027 – e-invoicing and e-reporting for small businesses below the above thresholds – also with an option to extend by a further three months to December 2027.

Germany

The German Bundesrat approves e-invoicing for B2B transactions within Germany, gradually commencing 1 January 2025 and with full implementation in 2028. In particular, on 22 March 2024, the German Bundesrat approved the law mandating B2B e-invoicing starting January 2027 for companies with turnover exceeding EUR 800,000, and in January 2028 for those below this threshold. However, all companies must be capable of receiving structured electronic invoices as of 1 January 2025. On 15 October 2024, the Federal Ministry of Finance issued a document about the principles for the application of the new e-invoicing regulations. 

We recommend ensuring that businesses in Germany prepare to comply with mandatory B2B e-invoicing requirements by the designated deadline.

Environment – social – government (ESG) levies

In the EU, we are currently witnessing significant developments in the ESG (environmental, social, governance) tax landscape. New levies are constantly being introduced, both small and large, which require our attention. These include, among others, plastic packaging taxes, sugar taxes and the extended producer responsibility. All of these topics fall within the realm of ESG and are becoming increasingly important.

The EU is planning to revise its pharmaceutical legislation to improve patient access to medicines, address supply shortages and foster innovation. Our second episode of the proposed EU pharma legislation explores the strategic implications of the proposed reform for the pharmaceutical industry, especially for Swiss-based companies.

Key changes introduced by the reform include variable incentives for orphan and paediatric drugs, a strengthened framework for scientific and regulatory support from the European Medicines Agency (EMA), simplified committee structures and provisions for emergency marketing authorisations. The blog post explains how these changes will affect the development and approval of medicinal products, as well as the competition and access in the EU market. 

Strategic considerations for Swiss-based companies are also provided, highlighting the need to adapt their strategies to align with the new regulatory environment. It is suggested that Swiss companies should take advantage of the enhanced support and incentives from the EMA, while also navigating the complexities of the revised framework. 

You are invited to check out the full blog post for more details and to contact our experts for further information. 

Learn how a solid regulatory strategy is essential for building investor trust and navigating the complex approval process. Our latest blog post delves into market authorisation, particularly for biotech products and rare disease therapies. We highlight the importance of understanding the regulatory pathways in the US and EU, and how these can impact a startup’s journey to market.

The post emphasises the critical role of regulatory affairs in ensuring a product’s success and the significance of maintaining transparent communication with investors. It outlines the importance of a well-defined regulatory strategy for business viability, operational efficiency and market access, which in turn boosts investor confidence and valuation.

For investors, the blog offers insights into the importance of due diligence and the value of monitoring regulatory milestones. It also discusses how regulatory consultants can add value by assisting with risk identification and long-term strategy development.

Whether you’re a startup seeking to bring innovative therapies to market or an investor looking to make informed decisions, understanding the synergy between regulatory compliance and investor trust is key. Get inspired to prioritise these elements for long-term profitability and growth.

Be sure to read the full post for a comprehensive guide on building investor confidence through strategic regulatory compliance in the biotech industry here.

Switzerland’s healthcare system is evolving, and our latest blog post provides a strategic guide to understanding these changes which came into effect per 1 January 2024. The Federal Council has introduced amendments aimed at reducing healthcare costs and enhancing transparency and efficiency. 

Key updates include:

1. Pricing changes: The shift from public to ex-factory pricing for medications, affecting how pharmaceutical companies set prices.
2. Adjustment to foreign price comparison: Adjustments in foreign price comparisons, including new deductibles and reference price changes for several European countries.
3. Therapy cross-comparison: Revised assessment rates for generics and biosimilars, with a focus on cost-effectiveness and market volume.
4. Early access to medications: New provisions for early market authorisation for high-need drugs.
5. Transparency boost: Mandatory publication of decisions regarding drug listings and pricing, fostering greater openness.

Read our blog post for an in-depth analysis of how these regulatory changes could impact the Swiss healthcare landscape here.

In this TP Talks podcast, Kristina Novak (Principal in PwC’s US National Tax Services Transfer Pricing practice) and David Ernick (Principal in PwC’s US National Tax Services Transfer Pricing practice) discuss the evolving landscape of country-by-country reporting (CbCR) with a focus on the Pillar Two Transitional CbCR Safe Harbor, its three tests, and the importance of accuracy in CbCR data. They then move on to public CbCR, addressing the shift from confidentiality to public disclosure, the potential differences in rules between countries, and important strategic considerations for companies. Kristina and David finish with key takeaways.

The podcast can be found here.