OECD Public Consultation on BEPS Actions 8 through 10 reveals planned revisions to transfer pricing drafts

In brief

During the July 6-7, 2015 public consultation on BEPS Actions 8 through 10, the OECD Working Party 6 announced planned revisions to its proposed changes to the Transfer Pricing Guidelines, including its December 2015 papers on Risk, Recharacterisation and Special Measures and Use of Profit Split Methods and its 2014 draft on Intangibles. The OECD also received feedback from speakers who had submitted written comments to the drafts on Cost Contribution Arrangements and Hard to Value Intangibles (proposed changes to Chapter VI of the Transfer Pricing Guidelines on Intangibles). In providing the updated status of the various transfer pricing workstreams, the OECD also confirmed the delivery timetable for the transfer pricing work.

The extent of potential changes to the Transfer Pricing Guidelines has been scaled back and appears to be more aligned with the arm’s-length principle of the Guidelines. This follows previous public consultations and the hundreds of pages of comments and feedback received from industry and representatives. Further, this scaling back may be attributable to an effort to reach consensus among the various taxing authorities participating in the Working Party 6.

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More than a match for fraudsters

How to combat sophisticated fraudsters who use information technology, social network analysis and psychology to target payment processes

These days fraudsters are increasingly targeting organisations’ payment processes using so-called social engineering techniques. Unlike plain hacking, social engineering is the art of manipulating people so they involuntarily give up confidential information, or act against company processes and policies. With the help of a combination of information technology, social network analysis and psychology, social engineers pass themselves off as customers, suppliers, and/or perhaps as your own company’s management to trigger the transfer of funds from the business.

Understanding your organisation’s readiness to combat today’s fraudsters is essential. PwC’s Fraud Risk and Control Framework covers fraud and corruption control holistically, splitting it into four key elements and then further into their component processes and controls. The key elements are:

  • Planning and resourcing
  • Prevention
  • Detection
  • Response.



Controlling the fraud risk within your business starts with understanding fraud trends

Our assessments aim to identify activities that can significantly impact your organisation’s reputation, expose the company to criminal or civil liability, or result in a financial loss. Such a fraud risk  assessment includes examining the existing systems, processes and the control environment to identify high risk transactions and the potential for misappropriation by either employees, related parties and/or third parties. The assessment evaluates whether or not processes and controls can be circumvented, including the susceptibility of controls to management override.

Read more here. If you have any questions, please do not hesitate do contact me.

Insurance 2020 & beyond: Equipping your business for the global tax revolution

global tax revolutionTax is under the spotlight. Never before has tax been more important to governments, taxpayers and other stakeholders. Tax forms the basis for public spending, and governments want larger budgets to achieve their specific goals. The reputation and well-being of companies, including insurance groups, is also being affected by external perceptions of how they manage their tax affairs. It’s vital that insurers respond in a clear and thoughtful way to a much wider base of stakeholders than ever before, including not only tax authorities and governments, but also regulators, investors, non-governmental organisations (NGOs), the media and the general public. In turn, the heightened reputational and non-compliance risks mean that boards are taking a much closer and more active interest in tax policies and how the tax landscape is set to evolve. Executives increasingly expect tax teams to keep them up to date with tax policy developments, strategic options and potential risks.

At the same time, the importance and challenge of managing tax costs have never been more important. Tax has always been one of an insurer’s most significant expenses, comparable to payroll and claims. CFOs and CEOs have looked to their tax professionals to find ways to manage their tax liabilities, and as transactions and legislation become ever more complex and sophisticated, so do tax arrangements. As companies focus on maximising return on equity and managing capital under new solvency regimes, the value that can be created by tax professionals is becoming
increasingly recognised and valued.

The challenges of managing tax risk and tax costs have been heightened by a raft of new tax compliance demands.


  • Introduction: Tax at the crossroads
  • New rules, new risks and new expectations: The changing demands on finance and tax teams
  • New skills, new partners and new technology: Getting transformation on track
  • Conclusion: Gauging the right way forward
  • Contacts

Download the full report here.

If you have any further questions please contact me.

Swiss Federal Council released dispatch of Corporate Tax Reform III on 5 June 2015

Last Friday, the Swiss Federal Council released the eagerly awaited dispatch and related draft bill of the Swiss Corporate Tax Reform III (“CTR III”) for further parliamentary discussion. With the CTR III, the Federal Council aims to maintain and improve the international competitiveness of the Swiss corporate tax system, although certain existing preferential rules will be abolished.

Following analysis of the answers, feedback and input from the cantons and from political and economic stakeholders, the Federal Council had already released the key parameters of the reform (read our related publication) on 1 April 2015. Compared to the parameters already announced, the dispatch contains no real surprises, but outlines in greater detail the rationale for the reduced number of individual measures and their overall composition, which the Federal Council considers a balanced package.

Click here to read the key elements of the CTR III reform, the way forward and our view of the dispatch. It also includes an overview of the positions taken by the cantons during consultation.

In addition, you will find the PwC position paper here.

Listen to our Corporate Tax Reform III Experts by following this link to the latest webcast, held on 8 June 2015.

Should you have any questions, please contact your usual PwC contact or any of the following Corporate Tax Reform III Champions at PwC Switzerland:

Andreas Staubli
Partner, Leader Tax & Legal
+41 58 792 44 72
Armin Marti
Partner, Leader Corporate Tax
+41 58 792 43 43
Daniel Gremaud
Partner, Leader Tax & Legal Romandie
+41 58 792 81 23
Claude-Alain Barke
Partner, Tax & Legal Romandie
+41 58 792 83 17
Benjamin Koch
Partner, Leader Transfer Pricing and
Value Chain Transformation
+41 58 792 43 34
Laurenz Schneider
Director, Corporate Tax
+41 58 792 59 38
Remo Küttel
Director, Tax & Legal
+41 58 792 68 69

The audit committee

A practical guide for audit committee members on the requirements and responsibilities of the audit committee.

In this publication, we summarise the current legal, regulatory and de facto provisions as well as the daily routine of the audit committee. In the process, we shine a light on a variety of aspects concerning the audit committee in all of the economic sectors relevant to Switzerland, from industrial undertakings to financial institutions.

Read more…
The audit committee

People strategy for the digital age – A new take on talent

Businesses face some pressing questions about their future talent pipelines and people strategy. The pace of technological, political and economic change has left CEOs standing on constantly shifting. Just as the industrial revolution did one and a half centuries, the digital revolution is reshaping the way we live our lives and the way we work. It’s also forcing a fundamental transformation of business – changing the relationship with customers, bringing new entrants and their disruptive technologies, driving new channels, products and services, breaking down the walls between industries and, in many cases, forcing a basic rethink of the business model.

The speed of change makes it almost impossible to predict the future with any degree of certainty.
In such a climate, organisations need a credible and forward looking leader; a role that has never been more critical. CEOs need to understand how technology can improve their business and the customer experience, and plan for things that seem a distant dream. Denise Ramos, CEO of ITT Corporation, puts it like this: “You have to create multiple futures and multiple options for your company, because you don’t know when the world’s going to look like three to five years from now.”

One of the biggest headaches for CEOs is making sure that the organisation has the right people to cope with what lies ahead. There’s the basic question of planning for the skills that are needed now and in the future: Which roles will be automated? What new roles will be needed to manage and run emerging technology? What skills should the company be looking for, and training their people for? Where will we find the people we need?

But more importantly, CEOs need to be sure that the business is fit to react quickly to whatever the future may throw at it – and that means filling it with adaptable, creative people, working in a culture where energy fizzes and ideas spark into life. If they can’t be found, they must be created.

Whatever technological innovations are ahead, it’s the people that will make the difference between eventual success and failure. That’s why CEOs need a people strategy for the digital age.

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People strategy for the digital age – A new take on talent

PwC Golden Age Index – how well are countries harnessing the power of older workers?

One of the key megatrends affecting all developed countries is an ageing population. Harnessing the potential of older workers will therefore become an increasingly important source of competitive advantage for both nations and businesses.

To explore how the OECD economies compare with each other in this regard, PwC has developed a new ‘Golden Age index’ comparing how well they are utilising workers aged 55 and over. The index includes relative employment, earnings and training rates for older workers for 34 OECD countries over the period since 2003.

Key findings include:

  • Most OECD countries’ employment rate has risen over time, so our relative index performance remains middling (19th out of 34)
  • If e.g. the UK could boost its employment rate for 55-69 year olds to match that of Sweden, the best performing EU country, this could boost annual UK GDP by around £100 billion (5.4%).
  • The top five countries in the index are Iceland, New Zealand, Sweden, Israel and Norway, with Chile a fast riser since 2003 in 6th place. Switzerland is on place 11.
  • The US, South Korea, Japan and Estonia round out the top 10 on the index.

PwC Golden Age Index – how well are countries harnessing the power of older workers?

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Alternative asset management 2020: Fast forward to centre stage

pwc_alternative_asset_management_2020_e_148x209Over the past several years, rapid developments in the global economic environment have pushed asset management to the forefront of social and economic change. An important part of this change – the need for increased and sustainable long-term investment returns – has propelled the alternative asset classes to centre stage. To help alternative asset managers plan for the future, we have considered the likely changes in the alternative asset management industry landscape over the coming years and identified six key business imperatives for alternative asset managers. We have then examined how managers can implement and prosper from each of these six imperatives.

Download the full report here.

If you have any further questions please contact me.

Swiss Administrative Court disallows capital contribution reserves that were previously offset with losses

In its decision of 4 June 2015, the Swiss Administrative Court came to the conclusion that capital contribution reserves, which were in the past offset with losses, are definitely lost.


Until 31 December 2010, any repayment of share premium and any other shareholder contributions that have not resulted in an increase of nominal capital were generally treated as a distribution of profit for both income tax and withholding tax purposes. As part of “Corporate Tax Reform II”, this so-called nominal principle was replaced by the capital contribution principle, which entered into force as of 1 January 2011.

The capital contribution principle allows repayment of shareholder contributions without triggering a liability for Swiss withholding tax at the level of the distributing company (article 5 para. 1bis Federal Withholding Tax Act), and without income tax consequences at the level of the Swiss individual shareholder.

Under the transition period specified by the Act, capital contributions are in principle qualified for the aforementioned tax treatment if accumulated after 31 December 1996, provided some further requirements are met, e.g. proper declaration vis-à-vis the Swiss Federal Tax Administration and recording in a special sub-account of the statutory reserves.

On 9 December 2010, the Swiss Federal Tax Administration (SFTA) published the Circular Letter “Capital Contribution Principle” No. 29 that covers questions regarding this change in law. The Circular Letter states that the offsetting of capital contributions with losses – even during the transition period between 31 December 1996 and 31 December 2010 – leads to a definitive elimination of such capital contributions. This part of Circular Letter No. 29 was extensively discussed within the tax community.

Decision of 4 June 2015 of Swiss Administrative Court

Relevant Tax
The company at question received during the transition period two potentially qualifying contributions, namely a direct contribution of CHF 840,000 in 2002 and a waiver of shareholder loans in the amount of CHF 425,479 in 2004, in total CHF 1,265,479. The waiver of CHF 425,479 was reported as income in the company’s 2004 profit and loss statement. The surplus of CHF 840,000 was offset with losses in the balance sheet of the company as per 31 December 2006. Consequently, both items no longer appeared as such on the balance sheets dated 31 December 2004 and 31 December 2006, respectively.

In its balance sheet dated 31 December 2009, the taxpayer reported capital contribution reserves of CHF 1,265,479 and declared that amount to the SFTA. The SFTA subsequently rejected those capital contribution reserves.

Considerations of the Swiss Administrative Court
In its decision of 4 June 2015, the Swiss Administrative Court came to the conclusion that capital contribution reserves which have been offset with losses are finally eliminated at the time they were offset. The Court justified its ruling with the following main arguments:

  • Firstly, the Swiss Administrative Court recognises that the amount of CHF 1,265,479 is eligible for qualification as a capital contribution reserve.
  • As to the question at hand, the principle that Swiss tax accounting follows Swiss book accounting (“Massgeblichkeitsprinzip”) is also relevant for Swiss withholding tax matters.
  • Consequently, the (potential) capital contribution reserve of CHF 1,265,479 was – due to the previous offset with losses – definitively consumed “at the latest by 31 December 2006”.
  • The decision of the Swiss Administrative Court further states that the interpretation of article 5 para. 1bis Federal Withholding Tax Act already leads to the conclusion that (potential) capital contribution reserves are definitively consumed when offset with losses. Accordingly, the court takes the view that Circular Letter No. 29 is consistent with the existing law.
  • In the opinion of the Swiss Administrative Court, it was not possible to re-establish the capital contribution reserves of CHF 1,265,479 in the company’s 2009 balance sheet as the full amount had already been offset with losses in the past.
  • The Swiss Administrative Court does not see a discrimination against those who did not offset but instead “kept” their losses.

Current conclusion

In our view, the relevant legal provisions of the various tax laws – in particular article 5 para. 1bis Federal Withholding Tax Act – do not mention any limitations for qualifying capital contributions. Therefore, a limiting interpretation of this principle would be contrary to its purpose and it should therefore be possible to re-establish capital contributions which were – in particular during the transition period – offset with losses.

This decision of the Swiss Administrative Court could still be appealed to the Swiss Supreme Court. If no appeal is lodged, this decision will become final and legally binding within a few weeks. In any case, an envisaged shareholders’ waiver and/or an offsetting of contributions with losses should be carefully analysed to prevent unintended tax consequences.

Should you have any questions in this regard, please get in touch with your usual PwC contact or the following PwC Corporate Tax specialists:

Stefan Schmid
Partner, Tax and Legal
+41 58 792 44 82

Dr Sarah Dahinden
Senior Manager, Tax & Legal, Attorney at Law
+41 58 792 44 25

EUDTG Newsletter 2015 – nr. 003 (March – April 2015)

This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax Group (EUDTG). If you would like to receive future editions of this newsletter, or wish to read previous editions, please refer to: www.pwc.com/eudtg


The following topics are covered in this issue of EU Tax News:

1. EU Court of Justice (CJEU) Cases

  • Austria: AG Opinion on Austrian goodwill amortisation scheme: Finanzamt Linz
  • Germany: Judgment on German roll-over relief where acquired or manufactured assets belong to a German PE’s capital assets: Commission v. Germany
  • Germany: CJEU Referral on tax relief in the case of multiple inheritances or gifts of the same assets: Feilen
  • Germany: AG Opinion on the link between Art. 4(4) German-Swiss double tax treaty and the EU-Swiss agreement on the free movement of persons: Bukovansky
  • Italy: CJEU Order on cumulative application of administrative penalties and criminal charges: Burzio

2. National Developments

  • Belgium: New draft bill on the contribution of financial institutions to State revenue
  • Belgium: Draft Cayman Tax bill: tax transparency for ‘legal constructions’
  • Belgium: Recent developments with respect to Belgian Fokus Bank claims for funds
  • Greece: Significant procedural requirements introduced for the deductibility of corporate expenses
  • Netherlands: Dutch AG opines that Luxembourg SICAV is not entitled to a refund of Dutch dividend withholding tax

3. EU Developments

  • EU: European Commission presents “Tax Transparency Package”, including mandatory automatic exchange of cross-border tax rulings in the EU
  • EU: European Parliament adopts Resolution on Annual Tax
  • Belgium: European Commission requests Belgium to bring its rules on dividend taxation into line
  • France: European Commission launches infringement procedure over 3% contribution on distribution of profits
  • Switzerland: EU and Switzerland agree to automatic exchange of information in tax matters from September 2018

Read the full newsletter here.

Should you have any questions, please contact your usual PwC contact or me.