The Swiss Federal Council in April 2016 initiated a consultation on the multilateral agreements on the exchange of country-by-country reports and the Swiss federal legislation required for its implementation. Under this timeline, the first exchange would occur in 2020—but earlier exchange could take place on a voluntary basis.
The implementation of the base erosion and profit shifting (BEPS) plan—and in particular those actions of the comprehensive action plan, as agreed to become minimum standards—is advancing fast. As of early April 2016, some 12 countries—Denmark, France, Italy, Ireland, the Netherlands, Portugal, Poland, Spain, UK, Australia, Japan, and Mexico—had fully enacted country-by-country (CbC) reporting rules, and eight countries including Germany, China, the United States, and India had published draft measures of CbC reporting provisions.
While most countries follow the OECD guidance on BEPS Action 13 with few deviations, if any, the EU in April 2016 was discussing a proposal for the general publication of CbC reports for multinationals within the EU—an extension of the action and its application. There is support for the public CbC reports, and it may be likely that EU companies, including Swiss companies, will need to consider what effect such publication could have on their global competitiveness.
The legislation in Switzerland—known in English as the “Swiss Federal Act on the International Automatic Exchange of Country-by-Country Reports of Multinationals”—or the “ALBA – Gesetz” has been available for consultation since 13 April 2016. The consultation period ends 13 July 2016.
The proposed legislation generally follows the recommendations of the OECD in BEPS Action 13. For companies that have their ultimate parent company domiciled in Switzerland, the threshold for consolidated turnover for having to provide a CbC report will be set at €750 million—or CHF 900 million. If there is no change to this threshold amount, some 200 Swiss-resident companies would be required to file their CbC reports with the Swiss Federal tax administration.
With or without referendum, it is likely that the CbC reporting rules will be effective and in force by 2018. This means that Swiss companies will be required to file their CbC reports for FY 2018 in 2019 in order for the Swiss tax administration to be able to automatically exchange information with other countries’ tax administrations in the first six months of 2020.
At first glance, it may appear that this timeline could create concerns for Swiss multinationals because many countries where they have subsidiaries may expect to receive CbC reports on FY 2016 data. The issue may be that some countries (such as France, Italy, the Netherlands, Australia, and Canada) will already apply the rules in their CbC reporting legislation, as enacted, and may request the CbC report from local subsidiaries of the Swiss multinational—something that the negotiations at the OECD have attempted to address for many reasons, including confidentiality.
However, the Swiss draft of the CbC reporting legislation includes in Article 29, a clause that allows the Swiss tax administration to receive and submit CbC reports for years prior to 2018—thus allowing Swiss multinationals to provide their reports on a “voluntary basis.”
In any event, given these developments, Swiss multinationals or companies with parent companies located in Switzerland and also satisfying the annual turnover threshold of CHF 900 million need to begin the process of being technically able to prepare the CbC report—and also to understand the “story” that the CbC report tells so that tax administrations receiving the CbC report are able to interpret the information received and contrast it to the “story” told by the transfer pricing documentation (i.e., when comparing the master file with the local file).
Read an April 2016 blog item posted by the KPMG member firm in Switzerland: BEPS: Swiss Act on Country-by-Country Reporting
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