The Swiss State Secretariat for International Financial Matters has released guidance for mutual agreement procedure (MAP) requests under Switzerland’s tax treaties. Switzerland has concluded double taxation agreements with numerous countries. Switzerland has concluded double taxation agreements with numerous countries. If double taxation nevertheless occurs with a country with which Switzerland has signed a double taxation agreement or if there is a risk of such double taxation occurring, taxpayers resident in Switzerland can request to the Federal Department of Finance to initiate a mutual agreement procedure.
A distinction can generally be made between two types of mutual agreement procedure:
- a) Mutual agreement procedure to eliminate double taxation that has already occurred or to prevent imminent double taxation. If, for example, a retired person’s pension is taxed both in Switzerland and in another state. Another example is when a state adjusts the taxable base of a company resident in the state due to transactions which it has carried out with a company based in Switzerland on the basis that the prices of which are considered not to match the at arm’s-length price.
- b) Mutual agreement procedure to avoid double taxation in the area of transfer pricing. Typically if a multinational wants to determine the pricing of transactions between group companies in advance in the form of an advance pricing agreement (APA). It is also possible within the framework of such an agreement to cover past tax periods if the facts and circumstances are identical (rollback).
A mutual agreement procedure can be multilateral if the circumstances justify this and a double taxation agreement which includes a provision on the mutual agreements exists between each of the countries concerned.
