Switzerland’s State Secretariat for International Financial Matters on January 10 issued a report on various ongoing tax projects, including the country’s take on the OECD deal, as well as the status of tax treaty negotiations, tax information exchange, mutual agreement procedure (MAP), and recent tax legislation.
Regarding the OECD Inclusive Framework’s two-pillar agreement on a global minimum tax and partial reallocation of taxing rights, the government update states that Switzerland’s “main concern here is legal certainty” and “the avoidance of multiple special rules for individual states” that could act “to the detriment of innovative countries with small domestic markets.” Accordingly, Switzerland is advocating for the interests of small, robust economies – with rules that are “applied uniformly worldwide and that are subject to a dispute resolution mechanism.”
On the tax treaty front, Switzerland is working to update and expand its network, which already extends to more than 100 countries. Last year, Switzerland signed a new tax treaty with Ethiopia and new tax treaty protocols with Armenia, Japan, and North Macedonia. In addition, new tax treaties entered into force with Bahrain, Brazil, and Saudi Arabia, while new amending protocols entered into force with Cyprus, Liechtenstein, and Malta.
With respect to the exchange of information for tax purposes, Switzerland exchanged country-by-country reports from multinational groups with 81 countries last year. The Swiss government also exchanged information on advance tax rulings around 750 times – although the OECD has still recommended improvements in this area for Switzerland (as well as for neighboring France). In addition, Switzerland exchanged with 96 countries information covering millions of financial accounts, and it initiated a consultation on expanding automatic exchange of information with 12 more states.
As to the use of MAP to resolve cross-border tax and transfer pricing disputes, the Swiss government completed 181 mutual agreement procedures in 2020 – most of them with other European countries. The report notes that the OECD has praised the efficiency of Switzerland’s transfer pricing MAP program as “world-leading.” In the OECD’s “MAP awards” released last November, the OECD named Switzerland as the fastest country at resolving transfer pricing disputes.
On the legislative side, the Swiss government enacted a law on the implementation of international tax agreements, which entered into force on January 1 of this year. The legislation overhauls the rules relating to MAP and withholding tax relief.
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