On 23 January 2024, the Swiss Tax Conference ("SSK"), in cooperation with the Swiss Federal Tax Administration ("SFTA"), published a detailed "article” on the topic of transfer pricing for the tax information dossier for the first time. The article covers the arm's length principle, the comparability analysis of transfer prices and the various methods for determining transfer prices. In addition, procedural aspects in connection with transfer pricing are outlined. The article published by the SSK and the SFTA is limited to the treatment of income tax and withholding tax.
In Switzerland, the arm's length principle for income tax is stipulated in Art. 58 para. 1 lit. b of the Federal Direct Federal Tax Act ("DBG") and Art. 24 para. 1 lit. a of the Federal Act on the Harmonisation of Direct Taxes of the Cantons and Municipalities ("StHG"); for withholding tax, it is derived from Art. 4 para. 1 let. b of the Federal Withholding Tax Act ("VStG"). Moreover, additional administrative directives exist which define the transfer prices for individual intra-group transactions (e.g., interest on intra-group loans). The taxpayer, however, always has the option of proving that a transaction complies with the arm's length principle.
In their article, SSK and SFTA refer in particular to the OECD Transfer Pricing Guidelines 2022, which - although they are not legally binding - are being increasingly used by the Swiss tax authorities and courts as an interpretation basis for the arm's length principle under Swiss law.
The article deals in detail with the comparability analysis, which is at the centre of the application of the arm's length principle. This involves, on the one hand, an analysis of intra-group transactions and, on the other hand, an analysis of transactions between independent companies that are considered potentially comparable.
Experience has shown that the tax authorities are increasingly focussing on transfer pricing, which is underlined to some extent by the publication of this article by the SSK and the SFTA.
Please do not hesitate to contact us if you have any questions on the various topics relating to the design of transfer pricing models and transfer pricing reviews.
