1) Has Switzerland implemented any BEPS recommendations? If so, which Action Items?
Switzerland plans to implement the minimum standards provided in the BEPS project. In response to the BEPS project, Switzerland has drafted legislation on the abolition of tax regimes, the spontaneous exchange of tax rulings, the prevention of treaty shopping, country-by-country reporting, and dispute resolution mechanisms.
The Swiss Federal Council has proposed to abolish existing arrangements that no longer align with international standards, primarily the cantonal tax statuses for holding, domiciliary, and mixed companies. To compensate for this abolition, an IP Box at the cantonal level has been announced. This IP Box will be in line with the international recognized “nexus approach”. It is planned that the cantons may grant a relief on IP Box profits of up to 90%. It also seems likely that a cantonal R&D input promotion measure in the form of a super deduction for R&D costs will be introduced.
Switzerland also began the process for ratifying a law on administrative assistance to introduce the spontaneous exchange of information into Swiss law. A draft decree was submitted to the Parliament in June 2015 for approval. Under this decree, Switzerland will exchange information on tax rulings according to the OECD minimum standards, with affected tax authorities. Switzerland will not accept that foreign authorities are allowed to conduct tax audits in the country. This decree is anticipated to enter into force in 2017. This should also be possible if a referendum is called. Switzerland is expected to exchange the content of tax rulings that have been agreed upon after January 1, 2010, and that are still in force on January 1, 2018. It is possible that Switzerland will sign bilateral agreements with some states and, based on such agreements, the content of tax rulings could already be exchanged in 2017 if the rulings are still in force on January 1, 2017.
Switzerland already has implicit unwritten rules to prevent treaty shopping. Based on a detailed questionnaire, the Swiss taxing authorities evaluate whether the foreign recipient of income, subject to withholding tax, has the right to use the relevant Double Tax Agreement (“DTA”). In light of the BEPS project, this practice will become more rigid.
On January 27, 2016, Switzerland and 31 other countries signed the multilateral country-by-country reporting agreement in Paris. Based on this agreement, the Swiss Federal Council published a decree that forms the legal basis for the automatic exchange of country-by-country reporting. The corresponding consultation procedure will be held in the spring or summer of 2016.
Regarding the access to dispute resolution mechanisms, no changes seem necessary. Switzerland has already implemented the mutual agreement procedure clause in its newer DTA, and plans to adjust the older ones to the OECD standard.
2) What is Switzerland’s expected timeline for implementing country-by-country reporting?
Switzerland expects country-by-country reporting to become effective from January 1, 2018. Exchanging country-by-country reports will take place beginning in 2010, for the fiscal year 2018.
The fact that Switzerland is not ready to exchange country-by-country reports from FY 2016 onwards is seen as a failure. Therefore, a secondary mechanism will be applicable. The Swiss Federal Council has planned to implement a clause in the legal basis that allows Swiss multinational enterprises to share country-by-country reports with foreign states, if requested in a subsidiary’s country.
3) What measures are multinationals in Switzerland taking to prepare for country-by-country reporting?
It is too early to say, but we expect to see a higher demand for transfer pricing services. Several multinationals are also hiring more transfer pricing specialists and constantly expanding their transfer pricing teams.
4) Are Switzerland’s taxing authorities taking any measures to prepare for any changes brought about by BEPS (e.g., changes in staffing, increases in budgets)?
Switzerland’s taxing authorities have not yet announced that they are taking any measures to prepare for changes brought about by BEPS.
5) How will country-by-country reporting affect how you provide services to your clients?
It is too early to tell.