Switzerland: How Switzerland intends to implement BEPS
Hans Rudolf Habermacher
Switzerland plans to implement the country-by-country reporting (CbCR) and exchange of information provisions recommended by the OECD as part of its final package of measures to counter tax base erosion and profit shifting (BEPS).
On October 5 the OECD presented its final BEPS action reports. In parallel, the Swiss Government presented its plans on how it intends to implement any compulsory changes which have not already been incorporated in the latest draft of the Swiss Corporate Tax Reform III (CTR III). The two major changes have been announced whereby Swiss-based multinationals would be requested to prepare and submit reporting on a country-by-country basis (BEPS action 13) and indicating that Switzerland intends to participate in the exchange of information between tax authorities on taxpayer-specific rulings (BEPS action 5).
Both changes will require an alteration of the Swiss legislation. Given the nature of the Swiss federal parliamentary process, the proposed legislations will be submitted to parliament in 2016 and are unlikely to enter into force before 2018. For CbCR in particular, the government plans to give companies and the tax administration sufficient time to implement mechanisms to deal with the new reporting requirement.
The planned timing for CBCR will mean that Switzerland cannot meet the proposed timetable of the OECD. As a result, Swiss-based multinational companies would have to resort to the alternative approach proposed by the OECD and submit their reporting via one of their group entities located in another country until the legislative process to allow this information to be submitted in Switzerland is complete.
Switzerland has a long-lasting tradition that companies may seek unilateral tax rulings which provide them with a unique level of certainty for their tax planning. By participating in the exchange of information the Swiss tax administration in future will need to provide information about existing rulings to foreign tax administrations upon request. The Swiss government has indicated, however, that it would only share information on tax rulings which are still valid on the date when the planned legislative change will take effect.
Besides the planned legislative changes, taxpayers should be aware of the fact that in the absence of specific transfer pricing legislation the Swiss tax administration refers to the OECD transfer pricing guidelines when assessing taxpayers. In this respect it is important to note that reference will automatically be made to the amended OECD TP guidelines when assessing future tax years (BEPS actions 8 – 10 and 13).
We recommend that companies review and assess possible effects of the BEPS initiative as well as the planned legislative changes on their tax and transfer pricing planning and take appropriate measures as necessary.
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