Tax Newsletter Central Switzerland

BEPS 2.0

The national implementation of the OECD minimum tax continues to progress. The following countries have implemented the Pillar Two minimum tax rules as of January 1, 2024:  

• Switzerland

• Germany

• Principality of Liechtenstein

• Italy 

For further information, please see our blog post and our International Tax News.

Development EU

• The EU Commission has issued a policy brief on the first experiences of the Foreign Subsidies Regulation (FSR) or the "Regulation on third-country subsidies distorting the internal market", which came into force in July 2023. According to the opinion, 53 reports were received in the first 100 days of the reporting obligation.
  • You may find the policy brief in our Tax Policy Alert.
  • You may find further information in our October 2023 update and here. 

• As part of further environmental protection measures, the EU Parliament implemented the so-called Environmental Crime Directive (ECD) in February 2024, which introduces various penal provisions 

  • You may find further information in our blog post.

USA -Budget 25 and tax measures 

US President Joe Biden presented the draft budget for 2025 in March 2024. Among other things, the draft includes various tax increases. For example, households with assets of over USD 100 million are to pay a minimum tax of 25%. Corporate taxes are to be raised to 28% and taxes on foreign income of international corporations are to be increased to 21%.

• You may find further information in our linked analysis of our US colleagues here.
• Further elaborations from the US treasury on the draft budget can be found here.

Bermuda

Until recently, there was no corporate income tax in Bermuda. In light of the OECD minimum taxation, Bermuda will now introduce a 15% corporate income tax for group companies of multinational groups from 2025. You can find more information here.

Singapore 

Effective January 1, 2024, Singapore will introduce various changes to the local participation exemption on the disposal of foreign assets. For more information, see our Tax Bulletin.

International Tax News

For ongoing updates from the international tax world, we recommend our international Tax News, which you can access here.

SFTA Safe Harbour interest rates

The Swiss Federal Tax Administration (SFTA) has published the circular letters on the tax-recognized interest rates for 2024 for advances or loans in Swiss francs and foreign currencies. These letters can be found under this link.

Further information can be found in our blog.

Share capital in functional currency

The Lucerne tax administration has published a newsletter on the practice of converting share capital into a foreign currency. The newsletter can be found under this link.

Fund product L-QIF

At its meeting on January 31, 2024, the Federal Council decided on the legal basis for the innovative fund product L-QIF (Limited Qualified Investor Fund). The communication can be found under this link.

Covid credits

At its meeting on March 27, 2024, the Federal Council decided to leave the interest rates for outstanding Covid-19 loans unchanged as of March 31, 2024. For loans up to CHF 500’000, 1.5 percent will continue to be payable and for loans over CHF 500’000, 2 percent will continue to be payable. The message can be found under this link.

Individual taxation

The Federal Council has adopted the message on the popular initiative “For individual taxation independent of marital status (tax justice initiative)” and the indirect counter-proposal (Federal Law on Individual Taxation). The message can be found under this link.

Self-employment

Circular letter No. 26 on self-employment has been formally updated. The changes particularly affect the deferral provision pursuant to Art. 18b DBG and the taxation provision pursuant to Art. 37b DBG in connection with the Federal Supreme Court decision (2C_255/2019 of March 9, 2020). The circular letter can be found here.

Cross-border commuters

On March 1, 2024, the Federal Council created the national legal basis for the taxation of teleworking by cross-border commuters by adopting the legislative message. This will enable cross-border commuters to be taxed even if they perform teleworking abroad. The message can be found here.

Changes of the Zurich tax book 

The Zurich cantonal tax administration has published a practical note on the cost-plus method and several adapted information sheets on withholding tax in the Zurich tax book. The published information sheets and the practical note can be found here.

Revision of the tax law of canton Graubünden

The draft for a partial revision of the tax law and the economic development law has been released for consultation. The aim of the adjustment of the tax law is to ensure that Graubünden municipalities receive an appropriate share of possible additional income from the OECD minimum tax. The economic development law is intended to create a new funding instrument (so-called qualifying tax credit) to strengthen the attractiveness and competitiveness of the location. You can find more information on the revisions here.

Revision of the tax law of canton Schaffhausen

At the end of the year 2023, the residents of the Canton of Schaffhausen have approved a partial revision of the cantonal law on direct taxes related to the OECD project on the taxation of large corporate groups. Coming into effect per January 1, 2024, respectively per January 1, 2025, the Cantonal tax law provides the following consequences for the taxation of companies:

• From January 1, 2024, the Schaffhausen tax law will introduce multi-tiered tax scales for corporate income tax. The applicable cantonal tax rate is determined by the scale into which the taxable profit is classified. Scale 1 includes all taxable profits up to CHF 5 million. Scale 2 all taxable profits from CHF 5 million and up to CHF 15 million. Scale 3 ultimately includes all taxable profits over CHF 15 million. 

• The multi-tiered tax rates have the effect, that the profit tax rate for large companies is brought closer to 15% and thus aligned with the OECD minimum taxation, and on the other hand, smaller companies (i.e. those with taxable profits of less than 5 million francs) benefit from a lower tax rate and, accordingly, from lower taxes.
• For the sustainable promotion of innovation, companies will continue to be granted the currently applicable patent box and R&D super deductions for Cantonal tax purposes. The benefit of such measures is limited to 70%. Hence, and provided global minimum tax does not apply, the cantonal income tax can be reduced by a maximum of 70% under such measures. 

Current case law

Enclosed you will find a selection of the Swiss Federal Court (SFC) and cantonal court decisions, that may be of interest to you:

• SFC dated 7 December 2023: Permissibility of Levying Real Estate Transfer Tax in the Event of a Fund Management Change

• SFC dated 5 January 2024: Tax deductibility of a share purchase of the renewal fund of a condominium unit

• SFC dated 2 November 2023: Intercantonal tax allocation for inheritance tax purposes and in particular the application of two different methods applied

• SFC dated 7 September 2023: Exemption from stamp duty requires the elimination of existing losses. This contradicts the decision of the Swiss Federal Administrative Court of 29 November 2021. The SFAC had decided that in the case of a qualified reorganisation, the stamp duty exemption under Art. 6 I k StG and Art. 12 StG does not require existing losses to be offset/eliminated.  

• Cantonal administrative court of Zug from 19 April 2022: Asymmetric (interim) dividends paid as ‘promote fees’ qualify for the participation deduction

PwC newsletter

We hope that this newsletter contains some topics of interest to you. If you have any questions, please do not hesitate to contact us. For ongoing updates from the world of tax, we also recommend our personalized newsletter, for which you can register using this link.

BEPS 2.0 Amount B

On 19th February 2024, the OECD/G20 Inclusive Framework (“IF”) published a report on setting the remuneration of baseline marketing and distribution functions within multinational groups – so called Amount B of Pillar 1 of BEPS 2.0. The new guidance outlines how to determine arm’s length profitability levels for one of the most commonly applied intragroup business activities: distribution of products by entities operating under a limited risk profile, either through a buy-sell model or utilizing group companies acting as sales agents / commissionaires. 

Please see our blog post here.

SFTA and SSK release transfer pricing guidelines and new Website

The Swiss tax authorities, namely the SSK (Schweizerische Steuerkonferenz) and the SFTA (Swiss Federal Tax Authorities), have issued a comprehensive article on transfer pricing.  

This article is the first extensive guidance from Swiss tax authorities on the intricacies of transfer pricing. The article, published on January 23, 2024, delves into a number of aspects of transfer pricing: confirming the legislative basis for transfer pricing in Switzerland, the interpretation of the arm’s length principle in relation to comparability analyses, the selection of transfer pricing methods, and providing transfer pricing guidance on specific issues relating to intangible property, intercompany services and financing transactions. 

In addition, the topic of maintaining appropriate transfer pricing documentation is addressed where reference is made to the OECD’s three-tier approach consisting of Master File, Local File and Country-by-Country Reporting. In this context, the article notes that, while there is no legal requirement to prepare Master and Local Files in Switzerland, taxpayers have an obligation to cooperate and are, therefore, required to provide evidence for the arm’s length character of their transfer prices upon request by the authorities. Our practical experience shows that this is best achieved by presenting an OECD-compliant documentation package consisting of Master and Local Files. 

The tax authorities also reiterate the option for taxpayers to discuss and agree their transfer pricing in advance, which we know is a clear advantage of the Swiss tax regime compared to the tax regimes of most other countries. The guidance on rulings includes a recommendation that applications are filed simultaneously at both the Federal and Cantonal Tax Authorities and notes that ruling requests must be filed with appropriate supporting documentation (for example a transfer pricing study). Both are notable because whilst we often did this in the past, we did not always do it. It shall further be noted that transfer pricing rulings are typically subject to the automatic ruling exchange due to their cross-border nature. 

See also our article and practical recommendations in this regard from our colleague Robert Fischer.

Furthermore, the SFTA has published a new website containing a list with frequently asked questions in various areas. The list may be expanded in the future by further topics. Please see also our blog post here in relation to the Cost+ method, withholding tax in connection with primary, countervailing and secondary adjustments, tax consequences of the Altera v. Commissioner decision of the US Tax Court of 7 June 2019 for Swiss taxpayers and intercompany loan arrangements.

This website is currently available in German and French and can be found here.

Public country-by-country reporting developments in Australia – revised draft legislation has Switzerland on the list of specified jurisdictions

Australia is moving ahead with introducing public country-by-country (CbC) reporting requirements, following the EU public CbC Reporting Directive that established a common framework for such disclosures in the EU. Australia has recently released revised draft legislation that reflects stakeholder feedback and aligns more closely with the EU public CbC regime. 

Under the revised draft legislation, CbC reporting parent entities with annual global income of A$1 billion or more and A$10 million or more of Australian-sourced income will be required to certain qualitative and quantitative tax information, disaggregated for Australia and 41 specified jurisdictions. 

The specified jurisdictions list includes Switzerland. Although the “specified jurisdictions” are based on the current Exposure Draft and jurisdictions may be added or removed by legislative instrument, if the draft legislation is enacted with the current list, multinationals groups subject to Australian public CbC regime will have to publish information related to Switzerland. 

The revised draft legislation allows for aggregation of financial and tax information for other jurisdictions, unless voluntarily disclosed on a CbC basis. It also imposes penalties for failure to publish the required information on time, ranging from A$6,260 to A$782,500, depending on the duration of the delay and the frequency of the offense. 

Under the current draft, for a December reporting period, the year ending 31 December 2025 would be the first year subject to Australian public CBC reporting, with reporting due by 31 December 2026.

Please find the link to our PwC Tax Alert here.

Italy introduces updated transfer pricing regulations

Italy has introduced a new act on the TP compliance requirements. One of the key differences compared to the previous rules is the new shorter deadline for submission of the TP documentation, which now is 9 months after the fiscal year-end for the FY 2023 documentation for the taxpayers with fiscal year-end on 31st December 2022. This means that the deadline for the tax return, and thus to have the TP documentation prepared, digitally signed and timestamped, would be 30th September 2024 (instead of 30th November). 

Here is a short article by PwC for your reference.

VAT

• PwC wins landmark case enabling public bodies to reclaim additional input VAT
  PwC has won a landmark case before the Federal Court for a community in the Canton of Zurich. This decision enables public bodies to reclaim input VAT on some investments in the past as well as in the future.
• What should you do?
  Any community, canton or city etc. which has previously incurred input VAT on investments which were used to generate taxable income (e.g., buildings rented out with VAT etc.) can now reclaim the input VAT from the FTA. If you have any questions or otherwise require support, please contact us. For more information, check out our blog.

Customs

• Passar Export live since 17 March 2024
  Passar is the Federal Office for Customs and Border Security’s (FOCB) new goods traffic system for the digital processing of customs procedures. Since 17 March 2024, Passar is also available for export customs declarations (Note: in Passar and in the new customs law, the term customs declaration is to be replaced by goods declaration). During a transitional phase, Passar and the previous systems will be operated in parallel. Swiss economic operators should plan the transition to Passar in a timely manner. While NCTS can only be used until 30 April 2024, e-dec Export will be available until the end of 2025. Therefore, companies also have the option to first switch from NCTS to e-dec Export if a direct transition to Passar is not possible. The prerequisite for switching to Passar is the registration as a business partner with the roles "Freight" and “Transport” in the ePortal of the federal government. 
  
  
• Trade and Economic Partnership Agreement EFTA-India signed
  The European Free Trade Association (EFTA), consisting of the countries Switzerland, Norway, Iceland and Liechtenstein, and India have signed a Trade and Economic Partnership Agreement (TEPA) that aims to boost bilateral trade and investment flows. The TEPA was signed on 10 March 2024 and could enter into force in autumn 2025 after the ratification by all involved parties. It represents a significant milestone in Swiss trade policy as Switzerland and the other three EFTA states become the first European partners to conclude a free trade agreement with India. Consequently, the TEPA is expected to provide the Swiss economy with a considerable competitive advantage, especially in relation to its European competitors. 
  
  Under the agreement, India offers Switzerland improved market access for the trade of goods, covering nearly 95 % of existing Swiss exports (excluding gold) and over 95 % of current exports of industrial products. For instance, Swiss watches will be entirely exempt from customs duties. As a result, Swiss exporters will benefit from annual customs duty savings of up to CHF 166 million, which will take effect immediately or after transitional periods. The agreement also offers more legal certainty for Swiss companies in the area of intellectual property and contains chapters to promote sustainable development and investment.
  
  
• Revision of the Customs Act 
  Detailed consultations on the total revision of the Customs Act began on 29 August 2023. The Committee for Economic Affairs and Taxation of the National Council (WAK-N) has to deal with a series of motions up to and including Article 84 on the general provisions and the economic section of the BAZG-Vollzugsaufgabengesetz (BAZG-VG).
  
  Treatment in the First Council / National Council in the winter session of 2023 has not yet been confirmed (possibly not until the spring session of 2024). Due to the delays, the planned entry into force of the new Customs Act on 1 January 2024 is no longer possible; entry into force at the earliest at the beginning of or in the course of 2025 is now more likely.
  
  
• Abolishment of customs duties in Switzerland
  Switzerland abolished the industrial customs duties for goods falling under Chapters 25–97 of the Swiss customs tariff, effective 1 January 2024 (with few exceptions). However, the other import taxes (e.g., automobile tax, VOC, import tax/VAT) as well as the import assessment procedure remain unchanged.
  
  As a result, all industrial products, i.e., products within the mentioned chapters with the exception of agricultural products (including agricultural processed products and animal feed) do no longer face customs duties upon import to Switzerland, irrespective of their origin of the goods, marking a significant policy change aimed at reducing trade barriers and enhancing economic competitiveness. This particularly benefits retailers (e.g., clothes, shoes, etc.) as well as production companies that can import the raw materials more cost-effectively. At the same time, the number of tariff codes are reduced, which requires the updating of master data for importers as well as exporters (same codes used for both directions).
  
  
• Digitisation of the Federal Office for Customs and Border Security (FOCBS)
  Passar is the FOCBS's new goods traffic system for the digital processing of customs procedures, which will cover all processes related to transit, export, import, special customs clearance and the collection of other duties by the end of 2026. Passar replaces the current customs clearance systems e-dec and NCTS as well as other customs applications. The changeover began in June 2023 and will affect international transit in a first step, exports from spring 2024 (parallel phase until June 2025), and imports from 2025. The changeover will involve a new registration of economic operators in the federal e-portal (onboarding).
  
  
• Automobile tax on the import of electric vehicles 
  The Federal Council decided at its meeting on November 8, 2023, that electric vehicles will be subject to automobile tax from January 1, 2024. This decision is based on the results of the consultation on the abolition of the tax exemption on electric vehicles, which were also noted. By changing the Automobile Tax Ordinance, the Federal Council would like to counteract tax losses and secure deposits for the benefit of the National Roads and Agglomeration Transport Fund (NAF). The taxation of electric cars is part of the adjustment concept for the state budget, which was decided by the Federal Council in January 2023.

Free trade agreement EU-New Zealand: Entering into force on May 1, 2024

The free trade agreement between the EU and New Zealand, which was signed on 9 July 2023, will enter into force on 1 May 2024. Bilateral trade in goods between the EU and New Zealand has steadily increased in recent years and reached a volume of almost € 9.1 billion in 2022, making the EU New Zealand's third largest trading partner. 

The EU expects this agreement to result in annual savings of approximately € 140 million in customs duties for EU companies, a potential growth of up to 30% in bilateral trade, an increase in annual EU exports by up to € 4.5 billion, and up to 80% more EU investment in New Zealand. Additionally, this free trade agreement is the first to fully encompass the EU's approach to trade and sustainable development.

Binding customs valuation information from the end of 2027

The European Commission has adopted a new regulation that will introduce binding valuation information (BVI) decisions for traders and customs authorities in the EU. BVI decisions will provide clarity and consistency on how to determine the customs value of imported or exported goods, which affects the amount of customs duties and other charges payable at the EU border. BVI decisions are valid for three years and binding for both the holder of the decision and the customs authorities throughout the EU.

To gain the binding valuation information, it should be requested by the economic operator. Within seven days at the latest, the customs authorities decide on the binding customs valuation information, providing the appropriate method of customs valuation or criteria, and the application thereof, to be used for determining the customs value of goods under particular circumstances. The BVI decision must be indicated in the customs declaration with the corresponding reference number. 

Furthermore, the regulation updates the existing rules on binding tariff information (BTI) and binding origin information (BOI), which define the classification and origin of goods for customs purposes. 

The regulation will only apply from 1 December 2027, when the electronic system for managing BVI, BTI and BOI decisions is expected to be ready.

EU Parliament adopts its position regarding the reform of the EU Customs Code

EU Parliament adopted its position on the proposals for the significant reform of the EU Customs Code on 13 March 2024. The package contains three separate legal acts:

• Main regulation that establishes the EU Customs Code and the EU Customs Authority,

• Council regulation on simplified tariff treatment for the distance sales and elimination of the customs duty relief threshold, and

• Council directive on a special scheme for distance sales of goods imported from third countries and import VAT.

The reform aims to change the way customs authorities operate, cooperate with traders, and manage goods that people order online. Therefore, this reform intends to impact the three key areas:

• E-Commerce: Platforms will be obliged to submit data on goods shipped to the EU within one day, aiming to ensure that goods comply with the EU standards and legal norms, and to reduce the undervaluation of imported goods.

• Trusted partners: Companies can undergo preliminary checks and controls to obtain a trusted trader status. Such companies can operate with a minimum of checks and paperwork, making customs procedures easier and faster.

• New digital solutions: The new EU DataHub will be the main IT system for all European customs authorities and simplify the communication and submission of information for businesses.

The position will be followed up by the new Parliament after the European election in June. The gradual implementation of the reform is expected to take place from 2028 to 2038 (not defined yet).

Environment – Social – Government («ESG») levies

In the EU, we are currently witnessing significant developments in the ESG (Environmental, Social, Governance) tax landscape. New levies are constantly being introduced, both small and large, which require our attention. These include among other plastic packaging taxes, sugar taxes, and the extended producer responsibility. All of these topics fall within the realm of ESG and are becoming increasingly important.

• Germany: Introduction of levy on single use plastics
  Germany has announced that they will implement the single-use plastics levy (EWKFondsG) as of 1 January 2025. The levy extends to those goods set out in Part E of the Annex to the Single-Use Plastics Directive, that is in summary:
  • Food containers;
  • Packets and wrappers;
  • Beverage containers and cups;
  • Lightweight plastic carrier bags;
  • Wet wipes;
  • Balloons; and
  • Tobacco products with filters and filters marketed for use in combination with tobacco products.

Businesses will be required to pay the levy in spring 2025.

• Italy: Plastic Tax and Sugar Tax Postponed to 1 July 2024
  The Plastic Tax concerns the consumption of single use items made with (even partially) plastic materials that have, or are intended to have, the function of containing, protecting, handling or delivering goods or food products. Sugar tax is applicable to the consumption of sweetened beverages (the “Sugar Tax").
  
  Both taxes have been subject to a number of postponements and, following the approval of the Budget bill for 2024, the Council of Ministers have announced a further postponement of both taxes to 1 July 2024.

Carbon Border Adjustment Mechanism (“CBAM”)

On 17 August 2023, the European Commission adopted the Implementing Regulation for the transitional period relating to the Carbon Border Adjustment Mechanism (CBAM). The approved Implementing Regulation and accompanying guidance:

• Confirms the reporting obligations for the CBAM transitional period, which commenced on 1 October 2023. Furthermore, it confirms that the CBAM reporting requirements and methodology will provide some flexibility when it comes to the values used to calculate embedded emissions on imports during the transitional phase. 

• Provides further guidance on the calculation of embedded emissions. Critically, the use of ‘default values’ are not limited for the first three quarterly CBAM reports (i.e., until 31 July 2024). However, after this date, default values may only be used for up to 20% of embedded emissions for complex goods and would qualify as “estimation”.

Note that first CBAM report (covering the fourth quarter of 2023) was initially due by 31st January 2024 but the European Commission extended this deadline to 31st March 2024.

The CBAM was announced as part of the European Commission’s ‘Fit for 55’ package.  This initiative aims to reduce net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. The CBAM is designed to contribute to this objective and prevent from a carbon leakage. Practically speaking, the CBAM will be a tax on the importation of carbon-intensive products from outside the European Union. In summary, the CBAM will likely affect businesses in three ways:

• It will increase the risk of non-compliance if affected businesses aren’t familiar with the, admittedly rather complex, process.

• It will increase the time (and associated costs) required to collect and to process data from suppliers.

• It will increase costs through the additional carbon price to be paid – as of 2026.

• It will increase reporting / administrative obligations for businesses.

Consequently, if you are active in the cement, iron, steel, aluminium, fertiliser, electricity or hydrogen industries (or in the value chain of these products), you should begin to assess how CBAM will impact you. Whilst you may not have a direct reporting obligation, you should expect to receive information requests from those impacted.

Pan-Euro-Mediterranean convention (PEM) rules of origin

On 7 December 2023, the PEM Joint Committee adopted the new and modernized rules of origin that aim to increase trade between the European Union and neighboring countries in the PEM region. The rules of origin will be implemented as of 1 January 2025 and will aim to modernise all preferential trade agreements among the 24 PEM trading partners by making the relevant rules of origin in those agreements more flexible and business-friendly.

The PEM Joint Committee also agreed to develop the use of electronic certification of origin in the view of further simplification of customs formalities.

European Union Combined Nomenclature

Effective from 1 January 2024, a new version of the EU Combined Nomenclature takes effect. Although the tariff changes are relatively minor, businesses must ensure their customs declarations accurately reflect any updates or new CN codes to avoid errors, fines and customs delays.

EU proposal VAT in the Digital Age (“ViDA”)

On 8 December 2022 the European (EU) Commission released its “VAT in the Digital Age (ViDA)” package, which is a set of proposals for new measures aiming to tackle the challenges of the digitization of the economy and to create a more resilient system against VAT fraud.   

The proposal deals with following main topics: 

1. Digital Reporting Requirements (“DRR”): to standardize the information required for electronic reporting and introducing mandatory e-invoicing for cross-border transactions.  
   Planned effective dates are 1 Jan 2024 and 1 Jan 2028
2. Platform economy VAT rules update: to address the challenges of equal treatment, clarifying the place of supply rules and enhancing the role of the platforms in the collection of VAT when they facilitate the supply of short-term accommodation rental or passenger transport services, but also for the supply of goods in almost all cases. 
   Planned effective date 1 Jan 2025
3. Measures to avoiding multiple VAT registrations: by introducing Single VAT Registration as well as expanding the existing One-Stop Shops (OSS) and Import One-Stop Shop (IOSS) schemes (and other smaller changes). 
   Planned effective date 1 Jan 2025

The ViDA initiative is an ambitious package that will result in significant changes and will have a major impact on systems and processes for a large number of businesses. However, the proposals are yet to go through the EU’s legislative process and will require the unanimous approval of all EU Member States as well as implementation in national legislations. Therefore, it remains to be seen whether the implementation of all proposed measures will be possible within the planned timeframe. 

E-Invoicing

• France
  The French Assemblée Nationale has proposed a revised timetable for the implementation of mandatory e-invoicing and e-reporting. There will be a pilot program during 2025, after which the new timetable will be as follows:

  • September 2026 - All businesses to be able to receive e-invoices

  • September 2026 - Large and mid-size businesses obliged to issue e-invoices

  • September 2027 - SMEs (including VSEs) obliged to issue e-invoices

The above timeline is subject to the legislative process and may still change.

• Germany
  The German Bundesrat approves e-invoicing for B2B transactions within Germany, gradually commencing January 1, 2025 and with full implementation in 2028. In particular, on March 22, 2024, the German Bundesrat approved the law mandating B2B e-invoicing starting January 2027 for companies with turnover exceeding €800,000, and in January 2028 for those below this threshold. However, all companies must be capable of receiving structured electronic invoices as of January 1, 2025.
  
  We recommend ensuring that businesses in Germany prepare to comply with mandatory B2B e-invoicing requirements by the designated deadline.

Pharma VAT Recovery for Rebates granted under KVV Art. 71a: A Smart Business Move for You

Pharmaceutical companies selling drugs listed on the Speciality List (SL) in Switzerland have the opportunity to gain a valuable VAT benefit that could significantly enhance their financial standing. The reason for this opportunity is a recent shift in the approach of health and/or disability insurers regarding the rebates required under Swiss law (KVV Article 71a).

Previously, pharmaceutical companies had to grant rebates for Specialty List (SL) medicines under KVV Art. 71a if those drugs had been used in special cases, the price had to be below the price listed on the SL with no further stipulation in the law.  

Non-SL drugs (which typically are not reimbursed by the health insurance) are reimbursed in special cases under KVV Art 71b, the prices in those cases were subject to negotiation between the health insurance and the pharmaceutical company. Rebates in those cases were not obligatory, but often agreed upon in the negotiations.  

The partial revision of the KVV which went into force on 1 January 2024 now requires pharmaceutical companies to grant a set percentage of rebate on drugs reimbursed in special cases, regardless of whether those Drugs are listed in the SL or not, the same rebates apply for both SL and non-SL drugs.   

Until recently, these rebates were usually issued with VAT on the credit notes, but recently, many insurers have requested the credit notes to be issued without VAT, to avoid any VAT risk on their side.  

This change implies that pharmaceutical companies may have inadvertently VAT on these rebates in the past that can be claimed back. The good news is that such overpaid VAT amounts can be reclaimed from the Swiss VAT authorities, provided that a VAT ruling confirming this option is in place. We've been instrumental in assisting numerous pharmaceutical clients in securing these rulings, enabling them to recoup substantial VAT sums spanning the past five years.

A comprehensive exploration of the KVV Art 71a to c revision from a tax perspective can be found in our recent blog post.

Our Swiss Pharma Regulatory and Indirect Tax experts are looking forward to discussing VAT refund opportunities together with you.  

Regulatory and tax implications related to the EU draft directive of the Union code for medicinal products

If you are a pharmaceutical company based in Switzerland or outside the EU, you may be wondering how the proposed EU Pharma Legislation Reform will affect your operations in the European market. This reform aims to modernise and harmonise the rules for medicinal products for human use, with implications for research, manufacturing, distribution and storage activities. In our latest blog post, we explore the key aspects of the reform, such as:  

• The new obligations for wholesale distribution authorisation holders, including stricter sourcing rules, authenticity verification and continuous supply guarantees

• The introduction of 'brokers' as intermediaries in the sale or purchase of medicinal products, and the requirements they must meet

• The environmental sustainability and crisis management measures to protect public health and the environment

• The challenges for non-EU companies, especially those holding a Swiss wholesale authorisation, in light of the German court case that restricts their access to the EU market

• The timelines and deadlines for the adoption and implementation of the reform

We also share our insights and recommendations on how to proactively mitigate the risks and ensure compliance with the current and future regulatory landscape. We have extensive experience in assisting pharma companies with tailored and integrated solutions for a resilient supply chain from a tax and regulatory perspective.

Learn more about the EU Pharma Legislation Reform and how it will impact your business. Read our full blog post here and contact us for further guidance and support.

In Focus: Strategic Solutions for AI Integration in the Pharma regulatory function 

Artificial intelligence (AI) will fundamentally reshape how companies operate in the Life Sciences industry. Hot topics include the governance and ethical concerns in the wake of the rapid rise of AI and Machine Learning (ML) in the mainstream. Balancing innovation with ethical considerations and sustainable practices is an ongoing challenge that demands harmonious integration of regulatory frameworks and industry best practices. 

How AI can benefit pharmaceutical companies  

• Resource optimisation:  Generative AI allows pharmaceutical companies to unleash the transformative power of AI to expedite pharmaceutical compliance and cut down on preparation timelines and costs in the pharmaceutical landscape.​ 
• AI is big and it is here to stay: As an example, a large Swiss Multinational pharmaceutical company has 150+ AI projects, partnering with Microsoft and NVIDIA to scale AI over the next decade to improve access, costs, and health outcomes.​ 
  
• Spearheading AI Capabilities: PwC makes a $1 billion investment to expand and scale AI capabilities. This investment features an industry-leading relationship with Microsoft, creating scalable offerings using OpenAI’s GPT-4/ChatGPT and Microsoft’s Azure OpenAI Service. 
  

Solving important problems for the pharma regulatory function 

The regulatory function faces an array of tasks in their day-to-day activities, from managing complex data and technical documents to navigating evolving regulations and help address patient needs. AI offers the potential to lighten this load, freeing up resources for the team to concentrate on tasks that require human creativity and insight. Potential use cases for generative AI in the Pharma regulatory function include: 

• Regulatory Intelligence: AI could streamline the monitoring and interpretation of regulatory changes, providing timely alerts and decision support for compliance.

• Document Management and Dossier Preparation: AI could enhance efficiency in regulatory document creation and dossier preparation by automating data analysis and ensuring compliance.

• Regulatory Submissions and Interactions: AI facilitates quicker and predictive responses to health authority inquiries, improving the efficiency of regulatory submissions and interactions.

• Compliance and Pharmacovigilance: AI could proactively monitor drug safety and compliance, predicting and addressing potential issues through analysis of diverse data sources.

• Labeling and Promotional Materials: AI could support the creation and regulation of drug labeling and promotional content, ensuring accuracy and compliance through advanced data processing. 

Conflicts and Problems: 

• Regulatory Gaps vs. Technological Advancements: Developing a comprehensive AI strategy for the implementation and use of AI in developing regulatory frameworks which barely keep pace with AI's rapid advancements remains a challenge, hindering seamless integration.
• Data Privacy vs. Innovation Acceleration: Ensuring patient data privacy while leveraging AI for innovation demands stringent measures to safeguard sensitive information. 

Proposed Solutions: 

• Develop a sober, strategic approach to AI: Develop a comprehensive strategy, understand the needs of your company, develop solid use cases which bridge the gap to the identified needs and take well-informed decisions. 
• Robust Data Practices: Implement robust data strategies to mitigate biases and ensure fair and transparent decision-making. 
• Data Security Measures: Enforce stringent measures to protect patient data privacy, ensuring ethical AI adoption. 

Conclusion: 

The convergence of AI and regulatory compliance presents immense opportunities for the Pharma Regulatory Function. While challenges persist, proactive strategies and collaborative efforts can ensure responsible AI integration. PwC's tailored accelerator program (AI Acceleration Program) stands ready to guide Life Sciences companies in unlocking AI's transformative potential while navigating regulatory complexities.