On 23 November, Switzerland’s Federal Council adopted a dispatch on the multilateral agreement on the exchange of country-by-country reports and for the federal act required for its implementation.
The aim of the proposal is to implement the minimum standard of the G20 countries and the OECD to combat base erosion and profit shifting (BEPS). The purpose of the reform is the improvement of transparency with regard to the taxation of multinationals and establish a uniform framework for the exchange of the reports.
The implementation of automatic exchange of country-by-country reports presupposes that Switzerland adopt a legal bases for the exchange.
With the dispatch, the Federal Council is submitting to Parliament for approval the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports signed by Switzerland on 27 January; and the Federal Act on the International Automatic Exchange of Country-by-Country Reports of Multinationals.
The other legal act necessary to implement the exchange of information, the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters, was adopted by Parliament on 18 December 2015. It will enter into force on 1 January 2017 and it will be applicable for Switzerland from 1 January 2018.
If the procedure for the exchange of information is put in place, Multinationals in Switzerland would be obliged for the first time to draw up a country-by-country report for the 2018 tax year. The exchange of country-by-country reports between Switzerland and its partner states could therefore take place in 2020. The Federal Council will determine with which countries Switzerland wishes to exchange data when the Federal Act on the International Automatic Exchange of Country-by-Country Reports of Multinationals comes into force.
Multinationals can on a voluntarily basis submit a country-by-country report for the tax period before 2018. The authority appointed to transmit these reports will be the Federal Tax Administration (FTA) on the basis of the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports to partner states from 2018.
The proposal has been sent to the Parliament for approval. If Parliament approves the proposal and a referendum is not held, the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports and the Federal Act on the International Automatic Exchange of Country-by-Country Reports of Multinationals could enter into force at the end of 2017.
Country-by-country reports will contain information on how turnover is generated by a group, taxes are paid by a multinational; and the most important economic activities of the multinational in the individual countries.
Only multinationals with an annual consolidated turnover of more than Euro 750 million (or the equivalent in the national currency) as of 1 January 2015 will be required to submit country-by-country reports. Approximately 200 groups resident in Switzerland are likely to be concerned.
Tax authorities of the countries where these groups have business units will be required to automatically transmit country-by-country reports on an annual basis if a bilateral foundation for the exchange exists. The data will be directed exclusively at tax authorities and will not be published.
Davide Anghileri
Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.
Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues.
Davide can be reached at [email protected].
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