All questions

Filing requirements

There is no explicit list of documents to be included in the tax filing in relation to transfer pricing issues. However, tax authorities may dispute certain transfer prices applied, and the taxpayer must demonstrate that the prices used in the transaction with a related party comply with the arm's-length principle and he or she must be able to provide commercial justification.

Since 1 December 2017, Swiss tax law requires multinational companies to submit a country-by-country report that complies with the requirements of Annex III to Chapter V of the OECD Transfer Pricing Guidelines. Submissions are not published and there is no initiative from lawmakers suggesting future publication.

Presenting the case

i Pricing methods

Switzerland relies on the OECD Transfer Pricing Guidelines concerning pricing methods.

Taxpayers may select the appropriate OECD-compliant pricing method to determine the arm's-length price. This includes traditional transaction methods, such as the comparable uncontrolled price method (CUP method), the resale price method and the cost plus method. Transactional profit methods, such as the transactional net margin method and the transactional profit split method, are also acceptable. The global formulary apportionment method is not considered OECD-compliant.

There is no hierarchy between the methods. The comparable uncontrolled price method is the preferred method and the transactional net margin method is the most common method.14 Under the CUP method, near comparables are required to compare transactions in a proper manner and can be adjusted because the exact same criteria for comparison cannot be completely fulfilled.

ii Authority scrutiny and evidence gathering

The cantonal tax authorities are responsible for assessing direct federal and cantonal taxes and the Federal Tax Administration plays a supervisory role. The Federal Tax Administration is, however, responsible for controlling withholding tax, stamp duties and VAT. Owing to their legal powers, the various tax authorities may audit taxpayers.

Administrative authorities issue tax assessments, and therefore evidence is usually gathered through a request for information directly addressed to taxpayers. Witnesses are rarely involved in such procedures. Accordingly, taxpayers should retain all documents necessary to prove that transfer prices complied with the arm's-length principle. The burden of proof lies with the taxpayer for the justification of the expenses, and with the tax authorities regarding adjustments that increase the taxpayer's taxable income. Global transfer pricing positions applied by multinational group can be provided as evidence to the tax authorities and are usually more successful if their results comply with the OECD Transfer Pricing Guidelines. In recent years, there has been an increase in the number of audits performed by Swiss tax authorities.