Tax Newsletter Central Switzerland

OECD: Publication of additional guidance for Pillar Two

On 15 January 2025, the OECD published additional Pillar Two guidance on the Global Anti-Base Erosion (GloBE) Model Rules and related documents to improve the administration of the global minimum tax. The publications include:

1. Three documents related to the GIR
   • an updated GloBE Information Return (GIR) document
   • a User Guide for Tax Administrations
   • a Multilateral Competent Authority Agreement on the Exchange of GloBE
2. Three Administrative Guidance items
   • Central Record of Legislation with Transitional Qualified Status
   • Articles 8.1.4 and 8.1.5 of the GloBE Rules
   • Article 9.1 of the GloBE Rules

Particularly important for Switzerland is the new Pillar Two Administrative Guidance that addresses the application of the transition rules of Art. 9.1. of the OECD Model Rules to certain deferred tax assets (DTAs). In a nutshell, reversal of the DTA attributable to ‘a governmental arrangement concluded or amended after 30 November 2021 where such governmental arrangement provides the taxpayer with a specific entitlement to a tax credit or other tax relief […] that does not arise independently of the arrangement’ will be excluded from Covered Taxes both for the full detailed Top-up Tax as well as the Transitional CbCR Safe Harbour calculations.

Notwithstanding the above, as an exception, the reversal of the above mentioned DTAs can be included in the Covered Taxes for the purpose of the full detailed Top-up Tax or Transitional CbCR Safe Harbour calculations for financial years beginning on or after 1 January 2024 and before 1 January 2026 but not including a financial year that ends after 30 June 2027 (grace period), up to 20% of the amount of each such DTA originally recorded and taken into account at the lower of the minimum rate or the applicable domestic tax rate (grace period limitation).

Additional information can be found here and here.

OECD: New Pillar One ‘Amount B’ publication

On 24 February 2025, the OECD published their consolidated report on Amount B, which contains an exemplary model for a competent authority agreement and guidance on how to identify the transactions covered by this measure. 

As part of the two-pillar solution under the OECD/G20 Inclusive Framework on BEPS, ‘Amount B’ standardises the arm’s length principle for in-country marketing and distribution activities, with a focus on low-capacity countries.

See OECD Consolidated Report on Amount B for further information.

Australia: New developments to country-by-country reporting

The Australian Parliament introduced public country-by-country (CBC) reporting obligations with effect from 1 July 2024. This will require large multinational groups with an Australian presence to submit data on their global financial and tax footprint to the Australian Taxation Office (ATO), which will be made available publicly. This new obligation will apply in addition to existing confidential country-by-country (CBC) reporting regimes and any other public CBC reporting regime that a multinational group may be subject to (e.g. the European Union regime).

The ATO released important updates on the 29 November 2024 in relation to CBC reporting exemptions. The ATO has significantly scaled back the use of exemptions such that, for periods starting on or after 1 January 2024, all CBC reporting entities are required to lodge a short form and a master file, even where there are no international related party dealings and the group is Australian with no offshore constituent entities.

Further information can be found under the following link from PwC Australia.

Australia’s Parliament passes Global and Domestic Minimum Tax

Australia has successfully passed its Pillar Two primary legislation in the Federal Parliament. This legislation sets out the framework for the application of Pillar Two, including the Australian Domestic Minimum Tax (DMT) and the Australian Income Inclusion Rule (IIR), which will apply to income years commencing on or after 1 January 2024. In addition, the Australian Undertaxed Profits Rule (UTPR) will come into effect for income years beginning on or after 1 January 2025.

At this stage, certain aspects of Australia’s Pillar Two remain to be enacted and are expected to be effective shortly before the end of the first full year of application.

Further information can be found under the following link from PwC Australia.

The United Arab Emirates introduces Pillar Two

As of 1 January 2025, the Qualified Domestic Top-up Tax (QDMTT) entered into force in the United Arab Emirates (UAE). The QDMTT applies to Multinational Enterprises (MNE’s) that fall within the scope of the Pillar Two based on the OECD Global Anti-Base Erosion (GloBE) Model Rules and will be levied in cases where the effective tax rate (ETR) of the MNE or a MNE group in the UAE is below 15%.

All financial years starting from or after 1 January 2025 are subject to the QDMTT in the UAE.

To date, it is not yet clear whether the UAE will also introduce the other GloBE mechanisms, such as the Income Inclusion Rule (IIR) or the Undertaxed Profits Rule (UTPR). 

Further information can be found under the following link from PwC Middle East.

Guernsey enacts Pillar Two rules

Guernsey has recently passed legislation to implement the OECD Pillar Two rules, which will become effective on 1 January 2025. Local guidance has not yet been published. Under the legislation, Guernsey has introduced a qualified domestic top-up tax (DTT) and a multinational top-up tax (MTT) for the Qualified Income Inclusion Rule (IIR), based on the GloBE Model Rules with some modifications.

Further information can be found under the following link from PwC US.

Liechtenstein: New Pillar Two registration requirement

In Liechtenstein, the OECD guidelines apply in principle, although Liechtenstein law contains a direct and static reference to the latest version of the OECD GloBE Model Rules. Future adjustments of the OECD GloBE Model Rules will therefore not apply automatically in Liechtenstein. Instead, they require implementation through separate regulations. The existing OECD GloBE guidelines currently apply.

Liechtenstein entities covered by Pillar Two must register within six months of the first financial year which falls within the scope of GloBE. The FL GloBE registration form is available on the website of the Liechtenstein Tax Authority.

The first GloBE information return (GIR) is due within 18 months (15 months for subsequent years), while the Liechtenstein QDMTT and IIR returns are due within 12 months of the end of the financial year. An extension is possible upon written request. Further details on the tax return forms or systems have not yet been published.

Further information can be found under the following link from PwC Switzerland – Liechtenstein.

USA: Treasury releases final disregarded payment loss regulations

The Treasury Department and the IRS published regulations on 10 January 2025, finalising, with modifications, the portions of the August 2024 proposed regulations addressing disregarded payment losses (DPLs) and the dual consolidated loss (DCL) and DPL rules. The final regulations affect domestic business owners that own disregarded payment entities (DPEs) and that make or receive certain disregarded payments.

The final regulations contain no provisions addressing the interaction of the DCL rules with the GloBE Model Rules. However, it’s expected that future final regulations will provide that the DCL rules will apply without regard to taxes imposed in foreign jurisdictions based on the GloBE Model Rules that arise in tax years beginning before 31 August 2025. The Treasury Department and the IRS have generally indicated an intent to finalise the remaining rules from the 2024 proposed regulations.

Further information can be found under the following link from PwC US.

USA: Treasury releases several guidance packages

• Qualified derivative payments for BEAT purposes

The Treasury Department and the IRS released proposed regulations on the Base Erosion and Anti-Abuse Tax (BEAT) rules on 10 January 2025. The 2025 proposed regulations relate to how qualified derivative payments (QDPs) are determined and reported with respect to securities lending transactions. The proposed regulations would change the way QDPs for securities lending transactions are determined for the purposes of BEAT and defer the QDP reporting requirement. The proposed regulatory rules would apply to taxable years beginning on or after the date the final regulations are published in the Federal Register, with specific QDP reporting rules applicable to taxable years beginning on or after 1 January 2027.

• Character and source of income from digital content and cloud transactions

The Treasury Department and the IRS published final regulations on 10 January 2025, on ‘digital content’ and ‘cloud transactions’. The 2025 final regulations generally follow the framework of the proposed regulations published in 2019, with some important revisions. And they generally apply to tax years beginning on or after the date of their publication in the Federal Register (i.e. 14 January 2025). The Treasury Department and the IRS have also issued long-awaited proposed regulations for determining the source of income from cloud transactions based on an individual taxpayer-based approach that takes into account the location of the taxpayer’s employees and assets (both tangible and intangible). 

• Guidance designating related-party basis shifting transactions of interest

The Treasury Department and the IRS issued final regulations on 10 January 2025, identifying certain related party transactions in partnerships as transactions of interest that must be disclosed to the IRS by the parties and material advisers. The final regulations are expected to be published in the Federal Register and will become effective on 14 January 2025.

• Guidance on spin-offs and other M&A transactions

On 13 January 2025, the Treasury Department and the IRS issued proposed regulations that would implement significant changes and new rules with respect to corporate spin-offs under Section 355 and related provisions (spin-off transactions) and other M&A transactions that would affect and clarify their eligibility for tax-free treatment. In connection with the proposed reporting rules, the IRS released a draft of a new multi-year reporting form (Form 7216) that certain taxpayers would be required to file in connection with a spin-off transaction.

Further information can be found under the links highlighted for each of the topics above from PwC US.

Federal Council opens consultation on change to FATCA model

In October 2014, the Federal Council decided to introduce the automatic exchange of information on tax matters on the basis of a multilateral agreement with the US developed within the framework of the OECD. As a result, Switzerland instructed the Federal Department of Finance to enter into negotiations with the US, which is not part of this multilateral agreement, to switch from Model 2 to Model 1. Under Model 1, the tax authorities of both countries automatically exchange information on account data with each other, currently only the US is receiving this data. After the negotiations concluded, Switzerland and the US signed a new FATCA agreement in Bern on 27 June 2024. The agreement will allow Switzerland to receive account data from the US. Swiss financial institutions will no longer provide the required data to the US authorities as before, but instead to the Swiss Federal Tax Administration, whose job it will be to transmit it to the US tax authorities.

To implement the new FATCA agreement, national law must be amended. In Switzerland, the Federal Assembly will decide on this. Based on current planning, Switzerland’s model change should come into force on 1 January 2027.

For more information, see the following link (German version).

New double taxation agreement between Switzerland and Zimbabwe

On 19 March 2025, Switzerland and Zimbabwe signed a double taxation agreement (DTA) in the field of taxes on income. This agreement helps to provide legal certainty for the further development of bilateral relations and the strengthening of tax cooperation between both countries.

For more information, see the following link (German version).

Mutual agreement between Switzerland and the US

The State Secretariat for International Financial Matters (SIF) announced that a new mutual agreement between Switzerland and the US regarding the eligibility of certain US and Swiss pension funds to claim treaty benefits was concluded on 5 December 2024. This agreement amends the mutual agreement of 16 April/6 May and in particular contains clarifications on the relief procedure applicable to group trusts under US law.

For more information, see the following link (German version).

Mutual agreement between Switzerland and Italy

The State Secretariat for International Financial Matters (SIF) announced that a new mutual agreement between Switzerland and Italy regarding administrative cooperation in accordance with Article 7 paragraph 1 of the Agreement of 23 December 2020 between the countries on the taxation of cross-border commuters, which sets out the details of the application of administrative cooperation through a mutual agreement of understanding.

For more information, see the following link (Italian version).

International Tax News

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

Location Promotion Basel-Stadt approved by the Grand Council

On 5 February 2025, the Grand Council approved the Basel-Stadt Location Package, as proposed by the Economic and Taxation Commission (Official Communication).

The Location Promotion shall promote the attractiveness of the Canton of Basel-Stadt in the context of the OECD minimum taxation. Here are the key changes between the previous proposal of the government council and the now approved version:

1. The Fund for Innovation, Society and Environment shall be split into a Fund for Innovation and a Fund for Society and Environment.
2. The annual fund cap has been increased to a range of CHF 150 million to CHF 500 million (initial proposal: CHF 150 million to CHF 300 million).
3. 20% of the fund will be used for society and environment.
4. The scope of the Location Promotion has been extended. Therefore, legal entities subject to unlimited and limited taxation in Basel-Stadt shall benefit from the funding measures.
5. The funding area for innovation, research and development shall be expanded to cover Northwestern Switzerland, with preference given to projects within the Canton of Basel-Stadt. Clinical studies shall also be included and supported.

The introduction of the second tax bracket of 8.5% for profits exceeding CHF 50 million, applicable for a period of ten years, and the adjustment of the maximum reduction in cantonal profit tax due to the patent box from 40% to 5% of taxable profit, remain unchanged. 

The package was subject to a voluntary referendum, which has been successfully submitted including 3,200 signatures (2,000 are necessary for a referendum). The public vote will take place on 18 May 2025. Most parties, including the Socialist Party, propose to accept the package; only the left wing BastA and the Green Party propose to reject the package in the vote.

Update on proposed cantonal tax rate changes for Zug and Lucerne

In late 2024, the Finance Commission of the Federal Council of States (‘Commission’) made a proposal to change the allocation of future Top-up Tax (QDMTT) funds between the Swiss Federation and the cantons. Based on that proposal, the allocation key would have been amended from the current 75/25% split (75% going to the cantons) to a 50/50% split. In other words, the cantons would have lost out on a significant portion of QDMTT funds.

Thereafter, various cantons (notably Zug and Lucerne) have been quite vocal in stating their disagreement with this proposal. This culminated in Zug’s proposal to introduce a two-rate corporate tax model, which was issued on 19 December 2024. In the meantime, there have been numerous discussions both at federal and cantonal level. We’ve summarised the main recent developments below.

Update at federal level

On 19 February 2025, the Federal Council made it clear (link to statement) that it doesn’t support the Commission’s proposal to adjust the QDMTT allocation key. On 24 February 2025, the Commission took these developments into consideration and repealed its previous proposal (link to press release).

Update for Zug

Following the repeal of the proposal at federal level (discussed above), the Zug government decided on 11 March 2025 to withdraw its previous plans to introduce a two-rate corporate tax model (link to press release). 

Update for Lucerne

The Canton of Lucerne doesn’t seem to be convinced that the discussions around the QDMTT allocation key are actually terminated at federal level. The basis for Lucerne’s skepticism is the fact that the Commission asked the Federal Finance Department to prepare a report on various technical questions, one of which is the QDMTT allocation key.

Against this background, Lucerne issued a statement announcing the launch of a public consultation for a cantonal tax reform 2027 (link to press release). The public consultation will last from 23 April to 23 July 2025. The major item within this reform would be a proposed introduction of two additional (higher) tax rate brackets, which would be relevant for companies with taxable income of more than CHF 50 million. Namely, the following corporate tax brackets are proposed:

Bracket 1

• Existing
• Taxable income thresholds: Up to CHF 50m
• Cantonal rate (incl. multiplier): 5.25%

Bracket 2

• New
• Taxable income thresholds: CHF 50-500m
• Cantonal rate (incl. multiplier): 8.25% (increase of 3%)

Bracket 3

• New
• Taxable income thresholds: From CHF 500m
• Cantonal rate (incl. multiplier): 12.25% (increase of additional 4%)

The documents for the public consultation aren’t available yet and will only be released on 23 April 2025. The revised rates would enter into force on 1 January 2027. But it’s important to note that a cantonal change is unlikely if the QDMTT allocation key remains unchanged.

Consultation on the exchange of information under the OECD minimum tax

On 29 January 2025, the Federal Council opened the consultation process for the approval of the international legal basis for the exchange of information regarding the OECD minimum tax. Multinational enterprise groups that fall within the scope of application will be able to submit the information centrally in one country. The countries participating in the information exchange will verify whether the tax calculations of multinational enterprise groups have been carried out correctly. The consultation process lasts until 8 May 2025. However, national implementation isn’t the subject of this draft. 

They suggest creating the basis under international law to enable the exchange of information on the OECD minimum tax. The Federal Council expects that many countries that have already implemented the minimum tax (in addition to the EU member states, e.g. Australia, Great Britain, Japan, Canada, Norway and South Korea) will do so. National implementation is to be covered in a separate draft law, which is expected to be submitted for consultation in the first half of 2025.

The media release can be found under this link.

Top-up tax: Tax treatment of business units that qualify as permanent establishments

On 18 March 2025, the Federal Tax Administration published a communication on the tax treatment of business units that qualify as permanent establishments. The communication sets out the legal classification under Swiss law along with the consequences for tax liability, procedural obligations and liability consequences (link to press release).

Dispatch on extending the international automatic exchange of information in tax matters

On 19 February 2025, the Federal Council submitted its dispatch on the expansion of the international automatic exchange of information on tax matters (AEOI) to Parliament. The expansion specifically concerns the new AEOI on crypto assets and the amendments to the standard for the AEOI on financial accounts. It’s scheduled to enter into force on 1 January 2026. 

Among other things, the proposal aims to criminalise negligent violations of due diligence, reporting and disclosure obligations and to simplify the admission of new AEOI partner states. During the consultation period from May to September 2024, the proposal was received positively by a majority. The Federal Council has already addressed a number of points of criticism by amending the original bill accordingly. Further proposed amendments are to be incorporated into the ordinance. You can find the communication under the following link.

COVID-19 loans

The Federal Council decided to decrease the interest rates for outstanding COVID-19 loans as of 31 March 2025. For loans up to CHF 500,000, 0.25% will be payable. For loans over CHF 500,000, 0.75% will be payable. The media release can be found under this link.

Statement from the SFTA clarifying the treatment of gains or losses resulting from selling treasury shares 

On 9 December 2024, the Swiss Federal Tax Administration (SFTA) issued a statement clarifying the treatment of gains or losses resulting from selling treasury shares. The statement clarifies the treatment of gains and losses from selling (‘re-issuance’) treasury shares, i.e. shares repurchased by the issuing entity and kept as own shares within the boundaries of Article 4a paragraphs 2 and 3 of the Swiss Withholding Tax Law. Such gains or losses are not considered taxable income/expenses, regardless of whether they’re booked directly in equity or in the income statement (correction for tax purposes based on Article 60 letter a or Article 58 paragraph 1 letter b DBG).

The SFTA intends to apply this to all transactions with treasury (‘own’) shares and not only those related to employee stock options plans. The SFTA qualifies the re-issuance of treasury shares as a tax-neutral capital contribution transaction that increases or decreases the ‘other capital reserves’, but not the ‘qualifying capital contribution reserves’. Treasury shares shouldn’t be remeasured in subsequent periods for statutory and tax purposes. Treasury shares acquired, held and sold by a subsidiary aren’t affected by the SFTA statement.

The full statement is available here (DE, FR).

SFTA Safe Harbour interest rates

The Swiss Federal Tax Administration (SFTA) has published the circular letters on the tax-recognised interest rates for 2025 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.

Reserves from capital contributions

The Swiss Federal Tax Administration has updated the annual change in reserves from capital contributions. The details can be found under this link (German version).

Reorganisation of corporations and cooperatives – circular letter 32a

The Swiss Federal Tax Administration has published the circular letter ‘Reorganisation of corporations and cooperatives (direct federal tax, withholding tax and stamp duties)’.

You can find the circular letter under the following link.

Various information sheets on withholding tax in the Canton of Schwyz updated

The Canton of Schwyz has amended various information sheets regarding withholding tax. You can find the information sheets under the following link (German version).

Amendment of the information sheet on the taxation of employee shareholdings and other decrees in the Canton of Zurich

The Canton of Zurich has revised the information sheet on the taxation of employee shareholdings and adapted it to current practice. In addition to the directive on the calculation of income in kind from the use of a company car for private journeys, several other decrees have also been amended. You can find the details and the decrees under the following link (German version).

Treatment of hidden capital contributions for income tax purposes 

The Canton of Lucerne has published a newsletter on the treatment of hidden capital contributions for income tax purposes. You can find the newsletter under the following link (German version).

Calculatory interest rate on security equity

The calculatory interest rate was published for the 2025 tax year and amounts to 0.317%. The calculated interest rate on the security equity corresponds to the yield on ten-year federal bonds on the last trading day of the calendar year preceding the start of the tax period in accordance with Article 25 a bis to paragraph 4 first sentence StHG (see Art. 3 para. 1 of the Ordinance of 13 November 2019 on the tax deduction on self-financing of legal entities; SR 642.142.2).

You can find the details under the following link (German version).

Price lists (ICTax)

The Swiss Federal Tax Administration has updated the price lists and the bonus share lists for 2024. The lists can be found under the following link.

Cantonal Gazettes

The Swiss Federal Tax Administration has published the cantonal gazettes, which complement the topics covered in the Tax Information dossier and are linked to the tax folders. The cantonal gazettes can be found at the following link (German version).

Tax policy proposals and initiatives 

The Swiss Federal Tax Administration has updated the table overview of tax policy proposals and initiatives. The overviews can be found under the following link (German version).

Changes in laws and ordinances regarding tax law for the years 2026–2028 

The Swiss Federal Tax Administration has updated its lists of amendments to laws and ordinances relating to direct federal tax, VAT, withholding tax and stamp duties. The lists can be found under the following link (German version).

Tax information dossier ‘Publicity of the tax register’ 

The tax information dossier ‘Publicity of tax registers’ has been updated. Among other things, the dossier lists the conditions under which information is provided to third parties. You can find the details under the following link (German version).

Tax information dossier ‘Taxation for self-employed persons’ 

The tax information dossier ‘Taxation of self-employed persons’ has been updated. It explains the taxation of income and the deductible costs of self-employed persons. You can find the details under the following link (German version).

Current case law

Enclosed you’ll find a selection of the Swiss Federal Court (SFC) and Swiss Federal Administrative Court (SFAC) that may be of interest to you: 

• SFC dated 19 February 2025: The Swiss Federal Supreme Court ruled in a specific case that the neutralisation of price gains through the formation of fluctuation reserves doesn’t constitute a tax-deductible formation of reserves. It emphasised that the general risk of future price losses therefore doesn’t justify the formation of tax-effective reserves, as these represent ‘future events’ that haven’t yet occurred. Furthermore, it’s still up to the cantons to provide for general fluctuation reserves for individual sectors.
• SFAC dated 12 March 2025: The Swiss Federal Administrative Court has ruled that an institution similar to a foundation, whose capital isn’t divided into shares yet is controlled and is considered transparent, meaning that the dividends to be paid aren’t attributable on its behalf. Accordingly, this means that no withholding tax can be reimbursed at all.
• SFC dated February 3, 2025: The Swiss Supreme Court issued two criminal judgments in the same case, one concerning an internal Controller of a Swiss company and the second one an external Tax Advisor. Following a cantonal tax audit and then a tax audit by the Swiss Federal Tax Administration (“SFTA”), the SFTA and later on the 2nd cantonal court found the Controller guilty of evading withholding tax (“WHT”) within the Swiss company. His criminal liability is confirmed by the Swiss Supreme Court, as he was in charge of signing the financial statements and filling the tax returns - and even though he did not decide on the group's financing policy himself. Therefore, the Swiss Supreme Court, like the 2nd cantonal court level, found the Controller guilty of evading WHT through criminal intent (“Eventualvorsatz”) for the years 2013 and 2014. This even though the taxpayer, and his/her Tax Advisor had tried to demonstrate that the interest rates applied complied with the arm's length principle. The Supreme Court also concluded that it is still possible to initiate criminal proceedings for the collection of the WHT, even after the SFTA final WHT invoice has been sent to the taxpayer. Now that the fine is CHF 8’000, this will result in a personal criminal record entry for the Controller. With respect to the Tax Advisor, the Supreme Court found that the 2nd VD cantonal court had overstepped its authority by re-evaluating the facts and evidence in a manner that was not permissible under the limited scope of review which the cantonal court had to apply. Furthermore, the Supreme Court held that the Tax Advisor did not incite tax evasion because he had merely provided legal advice on managing fiscal risks. 

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 the following link.

VAT

Publication of the EU VAT package ViDA (VAT in the Digital Age)

On 25 March 2025, the VAT in Digital Age (ViDA) directive was published in the Official Journal of the European Union. This marks the beginning of a new era as the directive regulates e-invoicing, digital reporting, single EU registration, reverse charge and taxing the platform economy. 

ViDA directive will enter into force on the 20th day following its publication in the Official Journal of the European Union.

The directive is complemented by two implementing regulations on VAT administrative cooperation arrangements (here) and information requirements for certain VAT schemes (here). 

The VAT Committee released conclusions and comments regarding the implementation of the ViDA proposal, focusing on changes that will take effect after the publication of the ViDA directive (20th day following publication).

The analysis explores which transactions may be subject to mandatory electronic invoicing, identifies affected taxpayers and evaluates the implications for reporting systems, especially in relation to regulations effective from 1 July 2030.

The key conclusions, primarily concerning the period following the directive’s publication, are summarised below:

• IC supplies, triangular transactions and reverse charge services to another Member State, where the supplier isn’t established, won’t be subject to mandatory electronic invoicing.
• Member States can’t require e-invoicing for taxable persons not established within their territory.
• The definition of ‘established’ in regulation 282/2011 can help determine the applicability of mandatory e-invoicing.
• E-invoicing doesn’t necessarily have to be linked to digital reporting (e-reporting).
• Member States can mandate e-invoicing for established entities without needing permission to deviate from the VAT directive.
• Newly introduced e-reporting systems must comply with the requirements of ViDA.
• Existing e-reporting systems that don’t meet ViDA standards can continue operating until 2035 but will need to adapt to ViDA requirements by then. This applies to systems granted permission or those in operation before 1 January 2024.
• No specific standard for e-invoicing will be required until 1 July 2030. After that, the European standard on e-invoicing and relevant syntaxes will apply to transactions covered under article 262 (e.g. recapitulative statements and reverse charge supplies), which will be included in the e-reporting system under ViDA.

Customs

EFTA signed a number of Free Trade Agreements 

In the first quarter, EFTA countries concluded two new Free Trade Agreements (FTAs) with Kosovo and Thailand. Additionally, the Grand Chamber approved the agreement with India, for which negotiations were concluded in March 2024. The agreements cover trade in goods, technical barriers to trade, sanitary and phytosanitary measures, trade in services, intellectual property rights, trade facilitation, trade remedies, competition, trade and sustainable development and legal and horizontal provisions. 

More specifically, in FTAs with Kosovo and Thailand, EFTA States committed to abolish all customs duties on imports of industrial products, including fish and other marine products, originating in Kosovo. Thailand mirrored the EFTA States’ obligations and committed to abolish all customs duties, whereas Kosovo will eliminate all customs duties on all industrial product, although certain goods will only become duty free after a dismantling period of three or five years. Additionally, Thailand and Kosovo will abolish all customs duties on imports of agricultural products originating in the ETFA States. EFTA States as well as Kosovo and Thailand agreed to reduce technical and sanitary hurdles. The FTA with Kosovo incorporates Pan-Euro-Mediterranean (PEM) rules of origin and its future amendments, whereas the FTA with Thailand rules provide for accumulation for both industrial and agricultural products among the parties and allows for self-declaration of origin.

The new FTAs still have to be ratified by the Swiss Parliament (with a potential referendum), therefore the dates of entry into force aren’t yet known.

Trade measures: lessons from the Harley-Davidson judgment by the ECJ

Back in 2018, the United States imposed additional tariffs on steel and aluminium imports from the European Union. In response, the EU introduced countermeasures, including higher tariffs on certain American products, such as Harley-Davidson motorcycles. To avoid these hefty tariffs, Harley-Davidson decided to move the production of motorcycles destined for the EU market from the United States to Thailand. They hoped this would allow their motorcycles to be considered Thai products, thus avoiding the additional EU tariffs.

Harley-Davidson sought official confirmation from Belgian customs authorities that their motorcycles would be recognised as Thai products. Initially, they received a favourable decision. However, the European Commission intervened, arguing that the primary reason for moving production was to dodge the EU tariffs, which isn’t economically justified under EU law. The Commission asked Belgium to revoke its decision.

More specifically, the European Court of Justice (ECJ) ruled that Harley-Davidson’s relocation of production from the US to Thailand was primarily aimed at circumventing additional EU tariffs on US motorcycles. The relocation was classified as ‘non-economic processing’ under Article 33 of the Delegated Regulation to the Union Customs Code, as its main purpose was to evade trade measures. This led to the invalidation of the binding origin rulings (BOIs) issued by Belgian customs authorities, which had confirmed Thailand as the country of origin.

The ECJ ruling highlights the importance of a sound economic justification for production relocations. Companies shifting production must ensure that such decisions are based on legitimate economic considerations and not solely on circumventing trade measures. Proper documentation and transparency are crucial to ensure the legality of such relocations and minimise regulatory risks.

What’s more, the case shows that relocations coinciding with trade measures such as protectionist tariffs or sanctions will be scrutinised more closely by authorities. Companies should carefully plan their production decisions, conduct legal analyses of relevant trade and customs regulations, and demonstrate the economic viability of the measures. The Harley-Davidson ruling underscores the need for a proactive and compliant approach to avoid regulatory uncertainties and potential economic disadvantages.

New Guidance on the Preferential Rules of Origin

The European Commission has released an updated version of its Guidance on the Preferential Rules of Origin, which is essential for businesses involved in trade with Free Trade Agreements. This new edition includes significant updates and clarifications that are crucial for compliance and optimisation of trade benefits. 

The key updates include verification of proof of origin and procedures for verifying document authenticity and the originating status of goods, involving both documentary control and on-site visits. It also covers requests exchanged between EU Member States and third countries, and clarifications on importers’ knowledge, where customs authorities may request additional information from importers. 

In addition, the guidance includes references to the Revised Pan-Euro-Mediterranean Convention, updated rules of origin applicable on a bilateral basis, detailed information on cumulation within the PEM system (bilateral, diagonal and full cumulation) and guidance on transitional provisions towards the Revised PEM Convention. Additionally, it reflects revisions linked to the modernisation of the EU-Chile Interim Trade Agreement, effective 1 February 2025, including updated product-specific rules of origin and explanatory notes for interpretation and application. 

Tariff engineering as a tool used by some companies to deal with tariff changes

Tariff engineering is the legally compliant practice of altering products so that they’re classified on a tariff code with lower import duties. Such actions may include altering the composition of materials or changing the design of products so that they can be reclassified under different HS codes. However, recent experience shows that some strategies, which might be seen by some companies as tariff engineering, could be regarded by others as fraudulent practices. This can lead to investigations and fines from customs authorities. If you want to read more about examples of tariff engineering and compliance considerations, check out our blog post.

Environment – social – governance (ESG) levies

In the EU, we’re currently facing significant updates in the ESG (environmental, social and governance) tax landscape. In terms of packaging, in January 2025 the EU published the new Regulation of Packaging and Packaging Waste (PPWR) in order to reduce packaging waste, promote reuse and recycling, and enhance resource efficiency. It aims to create a circular economy by reducing dependency on primary resources and encouraging sustainable packaging solutions. The regulation will be fully operational in August 2026 and include, among others, restrictions on hazardous substances in packaging (per- and polyfluorinated alkyl substances or PFASs) to protect consumer health and the environment and the implementation of extended producer responsibility (EPRs).  The Regulation focuses on packaging waste reduction by encouraging reusable and refillable packaging solutions. In terms of requirements, based on the new regulations, all packaging placed on the EU market should be designed for recycling by 2030 and recycled at scale by 2035 according to recycling performance grades (A (95%), B (80%), C (70%) and non-recyclable) and recycled at the scale score. Companies will be required to optimise the packaging flow, redesign their packaging and comply with the new requirements.

In terms of the Carbon Border Adjustment Mechanism (based on the latest updates due to the Omnibus proposal), a minimum threshold of 50 tonnes mass and simplification of compliance for small importers which are below the threshold are noted. Importers who are in scope of CBAM will need to apply for authorised CBAM declarant status to continue importing CBAM goods from 1 January 2026. The application process for authorised CBAM declarants began in March 2025.

New US biotech security measures and regulatory changes are reshaping the landscape for pharmaceutical and biotech companies. From the BIOSECURE Act’s impact on supply chains to an Executive Order increasing presidential oversight, these policy shifts present both challenges and opportunities. Explore the details behind these developments and their strategic implications in our latest blog post. Don’t miss this crucial industry update.

In the judgment dated 5 December 2024, the Administrative Court addressed a legal case concerning the question of whether it’s permissible for transfer prices within a corporate group to be consistently set at the lower end of the accepted range over multiple years to gain tax advantages.

The judgment clarified that it isn’t permissible for transfer prices within a corporate group to be deliberately set so that, on a multi-year average, only low margins are achieved, such as by intentionally using losses in one year to offset previous higher margins. This would contradict the fundamental objective of the respective tax law, which aims to ensure that each business unit is taxed based on its actual contribution to the value chain — and this should be assessed every year, i.e. per tax period.

The judgment underscores the importance of the periodicity principle in the tax law and for the application related to transfer pricing setting. Companies must make sure that their transfer prices accurately reflect the economic substance of the respective business unit each year. Deliberately manipulating transfer prices to minimise tax obligations is not tolerated. This requires companies to maintain careful documentation and evidence of their pricing decisions to meet the requirements of tax authorities and avoid potential legal disputes. In the long run, this strengthens transparency and fairness in international tax law and demands a high level of precision and honesty in companies’ financial reporting.

We therefore recommend reviewing how your company currently handles transfer pricing to ensure compliance with the periodicity principle. It’s crucial to verify that your pricing practices accurately reflect the economic contributions of each business unit on an annual basis. Conducting a thorough internal assessment can help identify any areas where alignment with these legal requirements may need improvement. This proactive approach will aid in maintaining transparency and mitigating potential risks of non-compliance with transfer pricing regulations.

The full judgment can be found here (in German).