Most corporate reorganisations (e.g. mergers, de-mergers, transfer of business assets within a group of companies, vertical and horizontal spin-off of business or part of business, share-for-share transactions and cross-border reorganisations where the Swiss tax residency and Swiss taxation of assets is maintained, and like-kind exchange of participations) are typically possible without triggering adverse Swiss tax consequences (tax neutrality is available). In addition, special rules provide for a legal framework to tax neutrally substitute assets and qualifying shareholdings. For reorganisations, it is best practice to apply for advance tax rulings with the competent tax authorities. Advance tax rulings covering certain cross-border reorganisation aspects may be subject to the spontaneous exchange of information (see Spontaneous exchange of information below).
Foreign Account Tax Compliance Act (FATCA)
In 2013, Switzerland and the United States (US) signed a bilateral FATCA agreement. The FATCA agreement will help Swiss financial institutions by means of simplifications in the implementation of the US FATCA legislation. The FATCA agreement and the implementing Swiss act entered into force on 2 June 2014 and 30 June 2014, respectively.
The FATCA agreement shall ensure that accounts held by US persons with Swiss financial institutions are disclosed to the US tax authorities either with the consent of the account holder or through ordinary administrative assistance channels (no automatic information exchange).
Base erosion and profit shifting (BEPS)
Based on the results of the BEPS project, Switzerland has launched several actions in order to implement BEPS measures into the Swiss tax law, in particular:
- Country-by-country (CbC) reporting: On 1 December 2017, the Multilateral Competent Authority Agreement on the Exchange of CbC reports, as well as the corresponding Swiss law, have entered into force. Generally, Swiss-headquartered multinationals with a revenue exceeding CHF 900 million are required to prepare a CbC report. They had to draw up a first CbC report in the year 2019 for the year 2018. The automatic exchange of these reports between the partner states started in 2020. Switzerland and its partner states will therefore exchange CbC reports from 2020 onwards.
- Multilateral Instrument (MLI): Switzerland signed the MLI on 7 June 2017 and ratified it on 29 August 2019. The MLI entered into force on 1 December 2019. Switzerland will implement minimum standards either within the framework of the MLI or by means of the bilateral negotiation of DTTs. Switzerland has already finished first bilateral negotiations in order to implement BEPS minimal standards within existing DTTs. The MLI includes a principal purpose test (PPT), based on which treaty benefits may be refused if an abusive arrangement exists.
- Pillar 2 (minimum tax rate): The Federal Council in January 2022 decided to implement the minimum tax rate agreed by the OECD and G20 member states by means of a constitutional amendment subject to public vote. The constitutional amendmend was adopted in the public vote on 18 June 2023. A temporary ordinance shall ensure that the minimum tax rate can come into force on 1 January 2024.
The implementation of further BEPS actions into the Swiss tax law and DTTs is an ongoing process.
Automatic information exchange
In view of the OECD’s developments on a new standard for the automatic exchange of information, Switzerland switched to an automatic exchange of information between the competent authorities on a reciprocal basis.
Switzerland has agreed on the automatic exchange of information in respective agreements with numerous partner states (e.g. the EU member states, many offshore countries, as well as most of the OECD member states).
Spontaneous exchange of information
The ordinance on international administrative assistance in tax matters (StAhiV) contains rules on the spontaneous exchange of information. A spontaneous exchange of information is an unrequested exchange of information available to the competent Swiss tax authorities that may be of interest to the competent foreign tax authority.
The spontaneous exchange of information covers the following advance tax rulings:
- Advance tax rulings relating to preferential tax regimes.
- Unilateral advance pricing agreements (APA) or other transfer pricing rulings.
- Downward adjustment rulings.
- PE rulings.
- Conduit rulings.
The relevant information regarding such advance tax rulings shall be spontaneously exchanged with the competent foreign tax authorities within three months after the receipt of the information by the Swiss Federal Tax Administration.