Switzerland: Transfer pricing controversy statistics, including effects of COVID-19

Trends in transfer pricing controversy in Switzerland and the effects of the coronavirus

Trends in transfer pricing controversy in Switzerland and the effects of the coronavirus

The government reported the following trends in transfer pricing controversy in Switzerland and the effects of the coronavirus (COVID-19) on such disputes.

Statistics reveal increased transfer pricing controversy cases

In recent years, the number of controversy cases (mutual agreement procedures (MAP) and advance pricing agreements (APAs)) has significantly increased. While in 2007 the government had around 50 pending cases on file (MAP and APA), this number far exceeded 400 active cases in 2021. Compared to 2020 which marked a peak with over 500 pending cases, the number of pending cases has decreased in 2021 for the first time since 2007: 

  • Overall, more cases were successfully closed than opened, even though the absolute number of closed cases decreased in 2021 relative to the previous year.
  • The number of newly opened cases significantly decreased from over 200 new cases in 2019 to less than 100 new cases in 2021. 

These developments may be due to various factors related to the measures against the global pandemic such as reduced or ceased operations on the competent authority’s part. There has also been an increase in efficiency of the negotiations with other competent authorities, shifting from long in-person meetings to shorter, more frequent meetings and the use of video-conferencing tools.   

Overall, the COVID-19 pandemic is expected to further reinforce this trend. Tax authorities will likely increase temporarily halted tax audit activities in the post-pandemic years in order to finance government measures brought forward to tackle the economic effects of the COVID-19 pandemic—leading to an increase in tax disputes over double taxation through MAP. 

Further, given the ever-increasing tax transparency measures globally paired with complex transfer pricing rules, an increased number of taxpayers is considering proactive approaches such as APAs. Even though governments are trying to safeguard their interests, there is a global trend towards transparency and a reduction in disparities between taxation policies. At the same time, taxpayers tend to prefer penalty savings and tax certainty over aggressive tax optimization. 

Overall, Switzerland’s competent authorities have been able to benefit from these developments. The government has been recognized by the OECD for its efficiency when it comes to the successful resolution of MAP cases. In 2020, Switzerland was recognized as the fastest competent authority to close MAP cases with an average closing time of 20 months per case. Swiss taxpayers can benefit from efficient negotiation procedures, ensuring faster certainty in their tax models and reducing their dispute-related costs. 

Current issues in transfer pricing controversy cases

Based on discussions with the government, frequently negotiated issues in transfer pricing controversy cases include the following: 

  • Remuneration of routine entities: the qualification and level of profitability of routine entities is often controversial.
  • Non-acceptance of applied business models: challenges if discrepancies occur between the contractual setup and the actual functions performed and risks borne.
  • Business restructurings: multiple elements in a business restructuring can give rise to controversies. For example the cross-border transfer and subsequent exit-taxation of significant assets such as intangibles is often a discussion point.
  • Non-acceptance of service fees: management service fee concepts applied by multinational enterprises (MNEs) are often scrutinized by the competent authorities and ultimately challenged. 

COVID-19 and transfer pricing dispute resolution

The OECD on 18 December 2020 published guidance on the transfer pricing implications of the COVID-19 pandemic in an attempt to address the uncertainty in the tax environment. Read TaxNewsFlash

While this guidance addressed several transfer pricing issues, a specific part of it related to the resolution of cases. One of the main challenges has been the efficient continuation of negotiating APAs. As such, the OECD guidance encouraged all parties in the process to keep a flexible and collaborative approach to take into account the economic reality. Different options are offered such as concluding short-term APAs for the COVID-19 period only or concluding APAs covering only the post COVID-19 period. 

New topics directly linked to the COVID-19 pandemic also needed to be addressed by the competent authorities through APAs, such as the increase of remote workers and the various responses and support provided by governments across the globe. 

KPMG observation

It’s too soon to fully evaluate the effects of such changes since taxpayers seem to approach the consequences of the pandemic differently. While some may want to enter proactively into negotiations to gain certainty on their suggested transfer pricing models, others may be more reluctant to consider the issues upfront and would rather wait to see the evolution of the economic circumstances before lodging new requests.

Read a May 2022 report prepared by the KPMG member firm in Switzerland


The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.