Last week, as part of a global effort to fight tax avoidance and evasion, Switzerland announced that, come 2020, it would join other jurisdictions in sharing tax information for multinational corporations operating in the country.
On October 18th, the Swiss Federal Council approved of the two regulations that will rule over this exchange of information, a crucial part to the OECD’s project to deal with base erosion and profit shifting (BEPS).
According to Ulrika Lomas of Tax-News, the Federal Act on the International Automatic Exchange of Country-by-Country Reports of Multinationals (CbC Act) will come into effect on December 1st, 2017, and be subsequently followed by the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country reports (CbC MCAA).
As reported by Reuters, this decision “will force about 200 large companies in the low-tax haven to prepare country-by-country reports - showing where they are generating revenues and where they are paying taxes.”
More specifically, as explained by Lomas, “multinationals operating in Switzerland will be required to draw up CbC reports from the 2018 fiscal year,” while “Switzerland and its partner states will exchange the CbCs from 2020” onwards.
As part of these new regulations, Switzerland “adopted a list of countries with which it intends to exchange CbC reports,” with these jurisdictions having “either signed the CbC MCAA or are member states of the Inclusive Framework on BEPS.”
Keep in mind that, as explained by Davide Anghileri for MNE Tax, “the exchange of information will not be applicable between Switzerland and another state until the other state has also included Switzerland on its list.”
For a full list of the countries with which Switzerland will exchange information, click here.
In a statement, the Swiss government said, “Switzerland is thereby fully implementing one of the global minimum standards of the base erosion and profit shifting project, which aims to improve transparency with regard to the taxation of multinationals and to establish a uniform framework for the exchange of the reports.”
Despite these efforts, which have been very well received, tax justice advocates believe there still is plenty left for Switzerland to do when it comes to curtailing tax avoidance and evasion.
John Christensen, Tax Justice Network’s Director, says, “There are still some issues in Switzerland regarding tax transparency, but there has been progress, and the move to country by country reporting is a major step forward. But Switzerland is still a follower rather than a leader when it comes to tax affairs.”
Switzerland Compliant with BEPS Action 14
On a related note, the OECD reported that Switzerland’s efforts to comply with BEPS Action 14 and handle tax dispute resolutions are, for the most part, sound.
The OECD stated that Switzerland “has an established MAP program and… extensive experience with resolving MAP cases,” with all of the country’s tax treaties containing a stipulation related to MAP.
More specifically, the OECD’s review of Switzerland’s handling of BEPS Action 14 says that the country “meets the minimum standard on the prevention of disputes, and provides access to MAP in all eligible cases,” and “has a notification process in place for situations in which the authorities deem the objection raised by taxpayers in a MAP request as not justified.”
The OECD’s peer reviewers, however, brought up two major criticisms to Switzerland’s tax dispute resolution practices.
First, “more resources may need to be dedicated to achieving a reduction in the number of MAP cases outstanding,” considering that “the average time to resolve cases is 22.05 months – which is below the 24-month maximum required to meet the minimum standard – but the average time necessary to resolve attribution/allocation was significantly longer (27.42 months).”
Second, the final report concludes that “more than half of Switzerland's tax treaties neither provide that mutual agreements shall be implemented notwithstanding any time limits in domestic law, nor include alternative provisions to set a time limit for making transfer pricing adjustments.”
Any thoughts on how Switzerland is currently handling its implementation of the OECD’s BEPS project?