New Transfer Pricing guidance published by the Swiss tax authorities

Challenges faced by companies 

Companies often find themselves under scrutiny during tax audits, both here in Switzerland and abroad, with authorities often placing significant emphasis on transfer pricing matters. The correct interpretation and application of the arm’s length principle regularly poses a challenge for companies engaged in cross-border intercompany transactions and the publication of this article is helpful in this regard.  

New Publication by SSK/SFTA 

The article, published on January 23, 2024, delves into a number of aspects of transfer pricing: confirming the legislative basis for transfer pricing in Switzerland, the interpretation of the arm’s length principle in relation to comparability analyses, the selection of transfer pricing methods, and providing transfer pricing guidance on specific issues relating to intangible property, intercompany services and financing transactions. 

In addition, the topic of maintaining appropriate transfer pricing documentation is addressed where reference is made to the OECD’s three-tier approach consisting of Master File, Local File and Country-by-Country Reporting. In this context, the article notes that, while there is no legal requirement to prepare Master and Local Files in Switzerland, taxpayers have an obligation to cooperate and are, therefore, required to provide evidence for the arm’s length character of their transfer prices upon request by the authorities. Our practical experience shows that this is best achieved by presenting an OECD-compliant documentation package consisting of Master and Local Files. 

The tax authorities also reiterate the option for taxpayers to discuss and agree their transfer pricing in advance, which is a clear advantage of the Swiss tax regime compared to the tax regimes of most other countries.  The guidance on rulings includes a recommendation that applications are filed simultaneously at both the Federal and Cantonal Tax Authorities and notes that ruling requests must be filed with appropriate supporting documentation (for example a transfer pricing study).   

The article also notes the possible implications of primary and secondary transfer pricing adjustments with respect to income and withholding taxes.     

While the guidance is not legally binding, it provides clear insights and helps to provide a basis for taxpayers to plan and set policies. The article explicitly references the 2022 edition of the OECD Transfer Pricing guidelines and signals the intention of the Swiss tax authorities’ to continue to largely adhere to these guidelines. This new publication does not provide new transfer pricing regulations per se but can be regarded as helpful guidance on how Swiss tax authorities interpret the arm’s length principle and how it shall be applied in practice. 

Recommendation for taxpayers in Switzerland 

International companies operating in Switzerland are encouraged to familiarise themselves with the new guidance and should consider using this publication as a trigger point for reviewing their transfer pricing polices and compliance procedures, and for considering whether to discuss and rule their transfer pricing policies with the tax authorities in advance.

Summary 

With the release of the comprehensive transfer pricing article by SSK and SFTA, companies operating in Switzerland are better informed about the Swiss tax authorities’ views on the application of the arm’s length principle and their expectations for taxpayers. Considering the emphasis put on transfer pricing in tax audits worldwide it is imperative for businesses to maintain and apply policies that are compliant with transfer pricing rules both here in Switzerland and in other countries.  

If you have any questions regarding transfer pricing or need any assistance, feel free to reach out to us.