Switzerland vs “A AG”, May 2021, Federal Supreme Court, Case No 2C_548/2020, 2C_551/2020

Posted on | By Courts of Switzerland
Category: Services and Fees, Transfer Pricing Methods | Tag: , , , , , , ,
« | »

Intra group services (treasury, administration, accounting etc) were performed and charged to a Swiss resident A AG. The payment for these services had been determined by application of the CUP method.

The tax authorities found that the payment for the services had been to high and instead applied a cost-plus method which resulted in lower service fees.

Judgment of the Supreme Court

The court decided in favor of the tax authorities.

A cost-plus method was more appropriate as

  • The taxpayer had been unable to provide evidence of any third party pricing of comparable services
  • The services provided were of a low-value-adding nature, for which the cost-plus method is more appropriate.

    •  
    Click here for English translation

    Click here for other translation

    Related Guidelines

    TPG2022 Chapter VII paragraph 7.31The method to be used to determine arm’s length transfer pricing for intra-group services should be determined according to the guidelines in Chapters I, II, and III. Often, the application of these guidelines will lead to use of the CUP or a cost-based method (cost plus method or cost-based TNMM)...
    TPG2022 Chapter II paragraph 2.13This part provides a detailed description of traditional transaction methods that are used to apply the arm’s length principle. These methods are the comparable uncontrolled price method or CUP method, the resale price method, and the cost plus method....
    TPG2022 Chapter II paragraph 2.3Traditional transaction methods are regarded as the most direct means of establishing whether conditions in the commercial and financial relations between associated enterprises are arm’s length. This is because any difference in the price of a controlled transaction from the price in a comparable uncontrolled transaction can normally be traced...
    TPG2022 Chapter VI paragraph 6.145The transfer pricing methods most likely to prove useful in matters involving transfers of one or more intangibles are the CUP method and the transactional profit split method. Valuation techniques can be useful tools. Supplemental guidance on the transfer pricing methods most likely to be useful in connection with transfers...
    TPG2022 Chapter VII paragraph 7.46The guidance in this section is not applicable to services that would ordinarily qualify as low value-adding intra-group services where such services are rendered to unrelated customers of the members of the MNE group. In such cases it can be expected that reliable internal comparables exist and can be used...
    TPG2022 Chapter VII paragraph 7.36For example, it may be the case that the market value of intra-group services is not greater than the costs incurred by the service provider. This could occur where, for example, the service is not an ordinary or recurrent activity of the service provider but is offered incidentally as a...
    TPG2022 Chapter VII paragraph 7.35Depending on the method being used to establish an arm’s length charge for intra-group services, the issue may arise whether it is necessary that the charge be such that it results in a profit for the service provider. In an arm’s length transaction, an independent enterprise normally would seek to...
    TPG2022 Chapter VII paragraph 7.34When an associated enterprise is acting only as an agent or intermediary in the provision of services, it is important in applying a cost based method that the return or mark-up is appropriate for the performance of an agency function rather than for the performance of the services themselves. In...
    TPG2022 Chapter VII paragraph 7.33Where a cost based method is determined to be the most appropriate method to the circumstances of the case, the analysis would require examining whether the costs incurred by the group service provider need some adjustment to make the comparison of the controlled and uncontrolled transactions reliable....
    TPG2022 Chapter I paragraph 1.9The arm’s length principle has also been found to work effectively in the vast majority of cases. For example, there are many cases involving the purchase and sale of commodities and the lending of money where an arm’s length price may readily be found in a comparable transaction undertaken by...

    Supplemental Guidance

    Peru – report on use of the most appropriate method to determine the market value of servicesIn december 2020 the tax authorities in Peru issued a new administrative ordinance related to use of the most appropriate method to determine the market value of services. Click here for English translation...
    Peru – SUNAT guidance on pricing of intra-group services and application of the benefit test9 September 2024, the Peruvian tax authority – SUNAT – issued guidance on the qualification of services, transfer pricing methods for services and the application of the “benefit test”. Click here for English translation...
    Copyright 2026 TPcases