OECD releases updated Transfer Pricing Guidelines, additional guidance on Country-by-Country Reporting

On July 10, 2017, the Organisation for Co-operation and Economic Development (OECD) released the 2017 edition of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (the Guidelines).  The 2017 edition incorporates a number of revisions the OECD has made to the Guidelines as part of its base erosion and profit shifting (BEPS) project since their last publication in 2010.

Specifically, the 2017 edition includes revisions introduced under BEPS Actions 8-10 (Aligning Transfer Pricing Outcomes with Value Creation) and 13 (Transfer Pricing Documentation and Country-by-Country (CbC) Reporting), revised guidance on safe harbors, and conforming changes to other parts of the Guidelines.

Additionally, on July 18, 2017, the OECD released additional updated guidance on the implementation of CbC reporting under BEPS Action 13 (the CbC guidance).  Action 13 is one of the four BEPS Actions that contain “minimum standards,” and CBC reporting is a recommendation that all countries in the OECD, as well as many other countries, have committed to implement or already have implemented.

What does this mean for Switzerland?

Switzerland does not maintain specific rules and regulations with respect to Transfer Pricing. However, in Circular letter No. 4 (March 19, 2004), the Swiss Federal Tax Authorities advises the Cantonal Tax Authorities to follow the OECD Transfer Pricing Guidelines to assess Transfer Pricing aspects and to apply the arm’s length principle.

Although the Transfer Pricing documentation requirements stipulated in BEPS Action 13 (and described in detail in the new OECD Transfer Pricing Guidelines) were not incorporated into Swiss Tax Law, foreign countries have already released or will release regulations to adapt the Master File / Local File approach in their local law. Swiss parent companies will be “forced” by foreign law to prepare appropriate Transfer Pricing Documentation to avoid any adverse implications (e.g. penalties).

On June 16, 2017, the Swiss parliament decided to introduce Country-by-Country regulations (CbC) into domestic law. Hence, particularly Swiss domestic companies, with consolidated revenues of at least CHF 900 million, will be required to file a CbC report for financial year 2016 (on a voluntary basis to avoid any adverse implications such as penalties in countries which have already incorporated CbC regulations into their domestic law) but latest for financial year 2018.

Companies are well advised to take into consideration the new OECD Transfer Pricing Guidelines to establish and defend their intercompany transactions along the new guidance and to carefully assess their Transfer Pricing compliance obligations.

Read more in our Tax Insights from Transfer Pricing

Published by

Benjamin Koch

Benjamin Koch

Benjamin Koch
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Postfach, 8050 Zürich
+41 58 792 43 34

Benjamin is leading the Transfer Pricing and Value Chain Transformation practice within PwC's Tax & Legal Services in Switzerland. His experience includes advising multinational companies on structuring of global value chains, development of global core documentation, migration of intangible property, establishing global trademark royalty schemes and the development of franchising and service fee concepts.

Benjamin Koch has substantial experience assisting companies in preventing tax audits and managing international tax controversies through the proactive use of Advance Pricing Arrangements (APAs), tax rulings and Mutual Agreement Procedures (MAPs). Furthermore, Benjamin Koch is PwC's Territory Leader for Tax Controversy and Dispute Resolution and represents PwC Switzerland in the technical working groups of the Swiss Corporate Tax Reform III.