CMS Expert Guide to Transfer Pricing Documentation in Switzerland

There are no specific/statutory TP documentation obligations in Switzerland. However, in tax audits, TP documentation will be inquired about. See section C.

This is basically not applicable (see Q1). However, some explanatory/definition answers are provided here – see section C.

See section C.

Associated enterprises are all enterprises under common control. Tax law refers to corporate law, Art. 963 CO:

A legal entity controls another undertaking if it:

1. directly or indirectly holds a majority of votes in the highest management body;
2. directly or indirectly has the right to appoint or remove a majority of the members of the supreme management or administrative body; or
3. it is able to exercise a controlling influence based on the articles of association, the foundation deed, a contract or comparable instruments.

Transactions with own branch offices/PEs generally need to be documented for VAT reporting purposes.

See section C.

See section C.

See section C.

The Swiss tax authorities often challenge the benchmark studies provided (especially in financing), since the Swiss (financing) market is not comparable to other European countries. Also, we regularly see that they challenge the selection filters applied (industry/sector, size etc). As a consequence, the TP team of the Federal Tax Administration (“FTA”) might do its own comparable study.

In lieu of benchmarking, the tax authorities have safe harbours for the following:

• minimum/maximum interest rates on intragroup lending (CHF and other currencies), updated/published once a year by the FTA 1  (generally by way of a circular in January)
• 5% cost-plus mark-up on routine services.

These safe harbours do not prevent the taxpayer from providing a benchmark study to demonstrate at arm’s length of a transaction applying another rate or mark-up.

See section C.

See section C.

See section C.

In general, it is the taxpayer’s obligation to prove all facts reducing its tax bill. Therefore, although there are no statutory TP documentation obligations, good TP documentation can effectively reverse the burden of proof in favour of the taxpayer.

Penalties, if any, for non-compliance with providing documentation in a tax audit or upon another tax inquiry have no impact on the right of the taxpayer to exercise its rights according to a tax treaty.

Of course, penalties are often linked to delays in compliance. In this regard, certain claims (especially appeals under domestic laws) might have expired.

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Yes. The legal framework for implementation of the exchange of CbCRs came into force on 1 December 2017.

The obligation to provide a CbCR was in place for the first time for tax years starting from 1 January 2018.

Reporting entities are required to report spontaneously to the FTA. The reporting obligation must be fulfilled no later than 90 days after the end of the reportable tax period. The CbCR must be submitted to the FTA no later than 12 months after the last day of the reporting period.

Multinational enterprise (“MNE”) groups with a parent company resident in Switzerland and a turnover of more than CHF 900 million are required to file a CbCR with the FTA.

Switzerland has implemented the minimum standard of the G20 countries and the OECD as per the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (ALBA/ACRE agreement) and issued the associated law (ALBAG/ACREA) and an ordinance (ALBAV/ACREO).

There is no obligation to file a report based on domestic law. A Swiss-resident subsidiary of an MNE group has no notification obligations towards the FTA with regard to filings abroad, the exception being if the group is effectively managed at the level of the Swiss subsidiary which is then considered to be the reporting entity of the group (Art. 10 ALBAG/ACREA).

Late filing by the responsible reporting entity can lead to a penalty of CHF 200 per day, maximum CHF 50,000 (Art. 12 ALBAG/ACREA).

Switzerland can – and does – exchange CbCRs with over 80 partner states.

The FTA automatically forwards CbCRs to the tax authorities of partner countries and makes them available to the tax authorities of the cantons in which entities belonging to the same MNE group are resident.

The first regular exchange took place in 2020.

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The Swiss Federal or cantonal tax authorities are entitled to require documentation or additional information of the group which they deem necessary to determine whether transactions are at arm’s length.

With regard to TP, reference can be made inter alia to the Federal Withholding Tax Act:

Art. 39 Duty to provide information:

lit. 1 The taxpayer must provide the FTA with information to the best of his knowledge and belief on all facts that may be of significance for tax liability or for the assessment of tax; in particular, he must

1.  […]
2. keep his books of account properly and provide them, the receipts and other documents on request.

Art. 40 Duty to provide information:

lit. 2 The FTA may examine the taxpayer’s business records, receipts and other documents on the spot to clarify the facts.

So although there are no formal TP documentation requirements with regard to maintenance in Switzerland, the tax authorities can ask during a tax audit for Master File documentation located with the head office to be provided. Further documentation directly concerning the Swiss enterprise may also have to be provided. Documentation referring to associated enterprises outside of Switzerland does not necessarily have to be disclosed, even if requested.

Having coherent TP documentation helps to convince the tax authorities that the intragroup charges meet the arm’s length standard. A general requirement (not specifically TP) is that all intragroup charges must be based on a validly signed/approved agreement and invoicing/payment must be documented.

From the general duty of care and arm’s length principle, all business transactions need to be documented (agreement, invoice, payment).

The Swiss constitution acknowledges the four languages of the country: German, French, Italian and Romansh. Generally, the taxpayer communicates with the tax authorities in the main language of the canton in which its head office is domiciled. Providing supporting documentation in English is accepted.

In practice, the FTA sends a list of required documentation to be ready for review at the beginning of a tax audit. During or at the end of the (generally on-site) audit, the tax auditors generally amend their list with additional documentation to be provided. This specific request generally includes a deadline of 30 days, which can be extended.

The obligation to provide documentation in case of a tax audit or other inquiry by the tax authorities applies to all taxpayers.

Non-compliance with requests during a tax audit, especially the request to provide proper documentation of business transactions (violation of the duty to provide information), can lead to penalties of CHF 500/CHF 5,000/up to CHF 20,000 depending on the tax authority – Federal or cantonal – and the seriousness of the violation, Art. 62, 64 and 67 of the Federal Withholding Tax Act; administrative criminal proceedings are reserved.

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