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Switzerland Transfer Pricing

Switzerland Transfer Pricing

Switzerland Transfer Pricing

Switzerland a true heaven on earth is a place worth going once in your life. The place is surrounded by tall alps and glaciers that soothe the eyes of the onlookers and can revitalize the energy in your body with its picturesque charm. The country is not only known for having the heavenly atmosphere and the backdrops but is famous for the goods it produces. The business commodities enjoy the best retail and sale prices within Switzerland as there is no specific transfer pricing law followed by the people.

Switzerland may not have specific transfer pricing legislation in its tax law, however, the arm length standard is defined unambiguously, the origin for regulating profits for non-arm’s length terms is fundamentally written in article 58 of the Federal Direct Tax Act, in addition to the Article 24 of the Harmonization of the Cantonal Tax Laws Act. Since Switzerland is an adherent of the OECD (Organization for Economic Co-operation and Development) and strictly abide by the OECD Transfer Pricing Guidelines in addition to it, the Swiss Federal Tax Administration has earlier inculcated cantonal tax administrations to consider the OECD transfer pricing course of action when taxing multinational enterprises.

The guidelines permit the following transfer pricing methods:

  • the similar uncontrolled price method
  • the resale price method
  • the cost plus method
  • the profit split method
  • the transactional net margin method

 

There is no priority of any method over the other and all are accepted without any formal documentation requirement. The language is not an issue either primary language is English while others can be done based on graphical region of the canton for instance German, French, Italian or Romansh.

There are no formal requirements in regard to the research of transfer pricing documentation. However, if requested, the taxpayer is obliged to provide documentation to back its transfer prices which were functional based on sound economic and commercial reasoning. There is no specific guidance as to the shape such documentation should turn itself into. There is no time frame for the request however, upon request of the Swiss tax authorities a taxpayer must succumb documentation within a reasonable timeframe normally are 30 days.

The best thing about Switzerland Transfer Pricing policy is that there is no penalty applied to the taxpayer in terms of their late reimbursement or their failure to produce documentation on the given days and time rather an Interest is imposed for late payments on adjustments.