Switzerland has a beneficial tax regime for principal companies. Based on Circular letter no. 8 of December 18, 2001 ("the Circular") of the Swiss Federal Tax Administration ("FTA"), Swiss principal companies are allowed to allocate part of their profit to their foreign commissionaire or limited risk distribution companies. The last couple of years there have been discussions between the FTA and taxpayers on the interpretation of the Circular. The FTA has now given clarity and confirmed in guidelines to the cantonal tax authorities the interpretation and clarifications on how the Circular should be applied.
The most important clarifications in interpretation are:
- The agents (commissionaires) or limited risk distributors may have a gross profit margin (i.e. gross turnover minus costs of goods sold) not exceeding 3% of gross turnover or its higher own costs (operating costs and taxes);
- At least 90% of the agent's (commissionaires) or limited risk distributor's activity should relate to the distribution activity for the group principal(s) ("exclusivity requirement"); and
- Key operating principal functions should be performed in Switzerland. Only auxiliary functions may be outsourced;
Please note that a higher Swiss effective tax rate results if these requirements cannot be met.
The clarifications apply to all rulings concluded after the release of the guidelines. If existing rulings do not include these requirements, these rulings should be amended effectively as per the next business year.
In this respect, the cantonal tax authorities will review existing principal structures within the next few months.
Taxpayers with existing Swiss principal structures should carefully review their set-up and prepare for discussions with the tax authorities regarding the implementation of the clarifications.
Bron: Loyens & Loeff
Informatiesoort: Nieuws
Rubriek: Internationaal belastingrecht
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