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Transfer pricing methods

Available methods

Which transfer pricing methods are used in your jurisdiction and what are the pros and cons of each method?

Swiss tax law prescribes the use of no specific transfer pricing methods. Therefore, any of the methods described in the Organisation for Economic Cooperation and Development Transfer Pricing Guidelines can be used.

Preferred methods and restrictions

Is there a hierarchy of preferred methods? Are there explicit limits or restrictions on certain methods?

Neither Swiss tax law nor case law or practice define a hierarchy of methods. Instead, the most appropriate method should be used.

Comparability analysis

What rules, standards and best practices should be considered when undertaking a comparability analysis?

There are no country-specific standards or best practices to be considered when undertaking comparability analysis.

Special considerations

Are there any special considerations or issues specific to your jurisdiction that associated parties should bear in mind when selecting transfer pricing methods?

No.

Documentation and reporting

Rules and procedures

What rules and procedures govern the preparation and filing of transfer pricing documentation (including submission deadlines or timeframes)?

Switzerland has signed the Multilateral Competent Authority Agreement for the Automatic Exchange of Country-by-Country Reports. Consequently, Swiss ultimate parent entities and surrogate parent entities with a group revenue exceeding Sfr900 million must file an annual country-by-country report. The corresponding law and ordinance entered into force on December 1 2017. Consequently, as of 2018, qualifying Swiss entities are required by law to file country-by-country reports on an annual basis. The deadline for filing the report is 12 months after the end of the respective business year (Article 11 of the Country-by-Country Law).

Aside from the country-by-country report, Swiss law does not require Swiss entities to compile transfer pricing documentation. However, if the competent tax administration questions the arm’s-length comparability of a transaction, the respective entity may be required to provide conclusive proof for the relevant transaction to be at arm’s length.

Content requirements

What content requirements apply to transfer pricing documentation? Are master-file/local-file and country-by-country reporting required?

The law requires only country-by-country reports to be filed. Neither master nor local-files are mandatory.

Penalties

What are the penalties for non-compliance with documentation and reporting requirements?

The law on country-by-country reporting provides penalties for non-filing, incorrect filing and late filing of reports, violation of the registration obligation and general non-compliance with the orders of the Swiss Federal Tax Administration. In the case of an intentional offence, the fine may amount to a maximum of Sfr250,000 (Article 24 of the Country-by-Country Reporting Law).

Best practices

What best practices should be considered when compiling and maintaining transfer pricing documentation (eg, in terms of risk assessment and audits)?

Aside from the country-by-country report, the law does not require Swiss entities to compile transfer pricing documentation.

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