Tax Newsletter Central Switzerland

Updates regarding BEPS 2.0

• Pillar Two Disclosure Exceptions under IFRS
  In September 2023, the IASB published adjustments to the IFRS accounting standard for SMEs. The adjustments are based on the amendments to IAS 12 issued in May 2023 and provide temporary relief in the accounting for deferred taxes resulting from the implementation of BEPS 2.0. You may find further information here.
• Convention to implement Amount A of Pillar One 
  The OECD published a package of guidelines regarding Amount A of Pillar One on 11 October 2023. You may find further information here.
• OECD released the third set of Administrative guidance on the GloBE Model Rules
  On 18 December, the OECD published a third set of administrative guidance on the Pillar 2 rules. The new guidelines provide greater clarity in the application of the Transitional CbCR Safe Harbor and address various administrative aspects of the application of the Pillar 2 rules. You can find a brief overview of the essential content here.

Developments EU

• Climate Legislation
  
  • CO2 border adjustment mechanism (CBAM):
    The transition phase of the CO2 border adjustment mechanism (Regulation (EU) 2023/956) started on 1 October 2023.
  • Fit for 55: The European Commission welcomes the conclusion of a legislative package that aims to reduce net greenhouse gas emissions by at least 55 percent by 2030. In this context, there should also be adjustments to the existing energy taxation directive. More information can be found here.
• DAC-8: Amendment to EU rules on administrative cooperation in tax matters 
  On 17 October 2023, the Council of the EU adopted a directive amending the EU rules on administrative cooperation in the field of taxation (DAC8). The changes primarily relate to the reporting and automatic exchange of information on certain income from crypto asset transactions and certain tax rulings. More information can be found here.
• European Commission releases BEFIT, transfer pricing, and head office proposals 
  On 12 September 2023 the European Commission released a new package of proposals: 
  • BEFIT-Directive (Business in Europe: Framework for taxation), proposing a single set of tax rules regarding the determination of tax base for corporations doing business within the EU. You may find further information here.
  • Council Directive on transfer pricing, which aims at harmonizing the transfer pricing rules within the EU. You may find further information here.
  • Council Directive establishing a Head Office Tax system for micro, small, and medium-sized enterprises. You may find further information here.
• Update list of non-cooperative jurisdictions 
  The European Council has decided to add Antigua and Barbuda, Belize and the Seychelles to the EU list of non-cooperative countries for tax purposes. At the same time, the following jurisdictions were removed from the list: British Virgin Islands, Costa Rica and Marshall Islands. You may find further information here.

• Germany: significant changes to interest deduction restrictions
  On 17 November, the German Bundestag passed the «Growth Opportunities Act» presented by the government. The Bundestag's legislative initiative provides that a new law will introduce an investment subsidy for certain investments to achieve energy savings and that numerous adjustments will be made to national and international tax regulations. You may find further information here.

International Tax News

For ongoing updates from the international tax world, we recommend our international Tax News, which is available at the following link.

Updates regarding BEPS 2.0

• Implementation of BEPS 2.0
  At its last meeting in 2023, the Federal Council decided on how to proceed with the national implementation of the global minimum tax. The entry into force of the Qualifying Domestic Minimum Tax (QDMTT) was set for 1 January 2024 in order to avoid the erosion of tax base to other countries. The implementation of other elements of the Pillar Two rules, i.e. the Income Inclusion Rule (IIR) and the Undertaxed Payments Rule (UTPR), has been postponed to a later date. You may find further information here.
  

Double Tax Treaty - Developments

• New cross-border commuter tax agreement with Italy 
  The new cross-border commuter tax agreement, which entered into force on 17 July 2023, will apply from 1 January 2024. This will entail some changes for the affected employers in the cantons of Ticino, Graubünden and Valais, such as the distinction between «existing» and «new» cross-border commuters. This must be determined by the employers. The «existing» cross-border commuters are those who have already worked in the aforementioned cantons between 31 December 2018 and 17 July 2023. These cross-border commuters will continue to be fully taxed in Switzerland at the normal withholding tax rates instead of the F source tax tariff. «New» cross-border commuters are those who are employed in Switzerland from 17 July 2023 at the earliest and whose place of residence in Italy is less than 20 kilometres from the border. In contrast to «existing» cross-border commuters, only 80% of their Swiss income will be taxed in Switzerland. This is done by means of new tariff codes (R, S, T, U and V). They are also taxed in Italy, which avoids double taxation. It is still unclear whether there will also be corresponding forms (employer's certificate of non-return days) for the maximum 45 non-return days, similar to France. It is also advisable to document the travelling days in this regard. Cross-border commuters can telework a maximum of 25 per cent of their employment without this leading to a change in cross-border commuter status under the 2020 cross-border commuter agreement. More information can be found here.
• Teleworking: Supplementary agreement to the double taxation agreement (DTA) with France
  From 1 January 2023, French cross-border commuters were already allowed to work up to 40% of their time from home in France in the form of teleworking by means of mutual agreements, without this having any impact on withholding tax or cross-border commuter status in Switzerland. These mutual agreements will now remain in force until 31 December 2024 at the latest or until they are replaced by the new supplementary agreement to the double taxation agreement with France. The Federal Council adopted the dispatch on the approval and implementation of the supplementary agreement on 22 November 2023. The new supplementary agreement also provides for a maximum percentage of 40% of working hours per calendar year to be spent working from home. Among other things, the new supplementary agreement provides for an exchange of information be-tween the two countries. This has already been the case until now, but what is new is that the number of home office days or the home office rate as a percentage must be disclosed. Employers must provide this information to the tax office so that this can be transmitted to the respective tax authorities in the other country. A corresponding travel calendar will therefore be essential for these employees. 

Developments in Switzerland

• Circular letter source tax tarifs (Quellensteuertarife) 2024
  The Federal Tax Administration has published the circular letter «Withholding tax tarifs 2024». You can find this circular letter under the following link.
• The international automatic exchange of information in tax matters should also include crypto assets in the future
  In a joint declaration, around 50 countries, including Switzerland, committed to the expanded international automatic exchange of information in tax matters (AIA). The extension affects crypto assets and is scheduled to apply from 1 January 2026. The Federal Department of Finance (EFD) will develop a consultation template for the implementation of the expanded AEOI by the end of June 2024.
• Federal Council decides to abolish the tax exemption on electric vehicles 
  From 1 January 2024, electric cars will be subject to automobile tax.
• Tax Dossier (Steuermäppchen) on real estate gains tax 
  The Federal Tax Administration has published the completely revised and expanded tax dossier «Taxation of property gains, tax sovereignty and calculation of property gains tax» The content provides overviews of federal and cantonal regulations. You can find this under the following link.
• Current case law
  

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

• SFC dated 17 August 2023: According to previous case law, the taxable person forfeits the right to challenge a legally binding assessment if they unreservedly recognize their tax liability in one canton despite being aware of the conflicting tax claim of the other canton. The Swiss Federal Court no longer considers the forfeiture of the right of appeal to be proportionate, so that the content must be examined to determine whether there has been a violation of federal law. If the legally binding assessment violates harmonized cantonal tax law or results in frowned upon double taxation, such a violation has occurred.
• SFAC dated 4 September 2023: According to the SFAC, the SFTA must take into account the hierarchy of transfer pricing methods when determining an appropriate third-party price. If there is no free market that enables an effective comparison, the SFAC states that the CUPM (comparable uncontrolled price method) must be used. Only in the absence of an effective comparison or a comparable transaction can the third-party comparison be made using additional methods in accordance with the OECD transfer pricing guidelines.
• SFAC dated 4. September 2023: Harmful forwarding via hedging through cross currency swaps leads to denial of beneficial ownership and refund of the withholding tax.
• SFC dated 7 September 2023: the issuance stamp duty waiver for the first CHF 10m according to art. 6 stamp duty act requires the eliminating of the existing losses. This decision is to some extent contrary to the decision of the SFAC from November 2021, which also addressed the stamp duty waiver according to art. 12 stamp duty act.
• SFAC dated 3 October 2023: The disclosure of any capital contribution in a separate balance sheet account is of constitutive nature and such disclosure must be made at the time of the contribution (and not only at the later time of any distribution). A subsequent rebooking is not permitted, with the sole exception of admissible balance sheet adjustments (Bilanzberichtigungen).
• SFAC dated 18. October 2023: There is no claim to receive pre-payment interest for securities transfer tax paid under reservation, if this tax has not been invoiced by the SFTA.
  
• SFC dated 13 November 2023: The professional real estate management required to qualify as a business does not depend on whether the management is carried out by the real estate company itself or by third parties on a contract basis.
• SFC dated 17 November 2023: No interruption of the relative statute of limitations when the assessment is served on unauthorized representatives.

PwC Newsletter

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OECD releases guidance on the Transitional CbCR Safe Harbour rules as part of the Pillar Two GloBE Administrative Guidance

As part of the latest Administrative guidance on the GloBE Model Rules (see Corporate Tax section above), the OECD has released additional guidance on the Transitional CbCR Safe Harbour rules.

The CbCR Safe Harbour allows MNEs to use data from their Country-by-Country Reports (CbCRs) to determine their effective tax rates (ETRs) for a limited period, subject to certain conditions and tests. The guidance further clarifies the application of the CbCR Safe Harbour, addressing the consistent use of data and what constitutes a qualifying CbCR (including where there are purchase price accounting adjustments). The guidance provides clarification with respect to the tested jurisdictions and the taxes that can be included as part of an entity’s simplified covered taxes and also addresses the percentages to use in applying the routine profits test.

While much of the guidance regarding the sources of data for the CbCR Safe Harbour is straightforward, some portions may give rise to concerns for MNEs. For example, the guidance provides that post year end adjustments (e.g., transfer pricing adjustments) to the financial statement data on which the CbCR is based are not permitted under the CbCR Safe Harbour. This does not reflect the reality for many MNEs that CbCRs are prepared using ‘actual’ numbers, which will typically reflect such post-year end adjustments. Accordingly, many MNEs will need to modify their approach to preparing their CbCR or else face the risk of disqualifying themselves from using the CbCR Safe Harbour.

France Introduces Updated Transfer Pricing Regulations

France’s Finance Bill for 2024, adopted on December 16, through article 22, introduces four measures reinforcing the French tax administration’s control of transfer pricing policies applied by multinational groups operating in France.

Given that the lower documentation thresholds apply to fiscal years starting from January 1st, 2024, groups failing under the new thresholds should take steps to timely prepare documentation, particularly in light of the reinforcement of penalties. With the adoption of the new HTVI regime, taxpayers should document in details the valuation method used at the time of the transactions to be prepared to respond to the new standard and limit the risk of challenge.