Protocol of Amendment to the Germany-Switzerland DTT

• The amended Germany-Switzerland DTT introduces defined deadlines and a more formalised mutual agreement and arbitration process, requiring companies to manage transfer pricing disputes more proactively and in a timely manner.
• While the new rules bring greater structure and predictability, uncertainties remain in practice—particularly around documentation requirements and the point at which arbitration timelines formally begin.
• By explicitly incorporating the Authorized OECD Approach (AOA) and reinforcing corresponding adjustments, the treaty strengthens consistency with OECD principles, while continuing to place strong emphasis on high‑quality transfer pricing documentation.

New deadlines and a more structured process

The Protocol of Amendment to the Germany-Switzerland DTT, signed on 21 August 2023, constitutes one of the most significant revisions of the treaty in many years. Following completion of the ratification process, the changes will generally apply from 1 January 2026; certain procedural provisions—particularly those concerning the mutual agreement and arbitration procedures—will take effect with a time delay for tax periods beginning in 2027. For transfer pricing practitioners, the redesign of the mutual agreement procedure is of central importance.

Going forward, an application to initiate a mutual agreement procedure must be filed within three years of the first notification of the measure that results in taxation not in accordance with the treaty. In practice, this time limit will regularly begin with the issuance of an amended tax assessment in the course of a tax audit. As a result, stringent deadline management becomes significantly more important, especially in cases where appeal or court proceedings are being conducted in parallel.

At the same time, the timeline of the mutual agreement procedure will be more formalised. If the competent authorities (CAs) fail to reach an agreement within three years, the DTT generally provides for a subsequent arbitration procedure. Unlike many other treaties, however, this period does not begin automatically upon filing the application. Instead, the decisive factor is an expressly defined start date, by which both CAs must have all the information they consider necessary for the substantive assessment of the case.

Starting point and arbitration

Greater clarity, but new uncertainties

Defining an independent start date is of considerable practical importance. In practice, taxpayers and tax authorities often hold differing views on when a case is deemed sufficiently documented. This can delay the commencement of the time limit, making the process less predictable and necessitating close and ongoing communication with the CAs.

The Protocol of Amendment also provides more detailed rules for arbitration. While the wording suggests it is a mandatory subsequent step, in practice it is contingent on several cumulative prerequisites. Notably, the CAs may agree within the applicable time limit that a case is not suitable for arbitration. Consequently, a residual risk remains that, even after time has elapsed, no binding resolution will be achieved.

For transfer pricing practitioners, this means the mutual agreement procedure is still not a foregone conclusion. The quality of the underlying transfer pricing analysis, the traceability of adjustments, and the completeness of the submitted information remain decisive factors for the success of the procedure.

Further transfer pricing relevant changes

AOA and corresponding adjustments

In addition to the procedural innovations, the Protocol of Amendment includes further amendments relevant to transfer pricing practice. Of particular relevance is the explicit incorporation of the Authorized OECD Approach (AOA) into Article 7 of the Germany-Switzerland DTT. This clarifies that profit attribution to permanent establishments follows the separate legal entity approach and is aligned with the OECD Transfer Pricing Guidelines.

The possibility of corresponding adjustments in the event of profit adjustments is also re-emphasized in Article 9 of the Germany-Switzerland DTT. This explicitly anchors principles in the treaty that previously often had to be enforced through the mutual agreement procedure. In the best case, this can lead to faster elimination of economic double taxation for taxpayers, but it still requires robust and consistent income adjustments in tax audits.

Conclusion and outlook

Overall, the Protocol of Amendment to the Germany-Switzerland DTT brings greater alignment with international standards and further formalises the mutual agreement and arbitration procedures. For companies with cross-border transfer pricing disputes between Germany and Switzerland, this significantly raises the bar for deadline management, documentation, and procedural management.

At the same time, the reform creates opportunities – with early and strategic management of tax audits, the clearer structures can deliver greater transparency and predictability. For transfer pricing practitioners, it will be even more important to provide transparent justifications for transfer pricing adjustments and to define the procedural course early, to make effective use of corresponding adjustments and, where appropriate, the mutual agreement procedure.

Robert Fischer

Director Transfer Pricing, PwC Switzerland

Robert Fischer is a Director in the Transfer Pricing & Value Chain Transformation practice of PwC Switzerland. He is based in Zug and is heading the Transfer Pricing practice for the region of Central Switzerland. Robert has significant experience in overseeing transfer pricing projects such as performing transfer pricing reviews, tax-efficient supply chain reorganizations, documentation and managing transfer pricing disputes. Furthermore, Robert has advised leading multinationals in multiple industries. Robert is the (co-)author of various articles on transfer pricing and a regular speaker at third party conferences and training seminars on transfer pricing.