Switzerland vs Corp, 16. Dezember 2015, Case No. SB-2015-00005

A AG granted loans to group companies as part of a cash pooling system via the parent company. The Swiss tax administration found the interest insufficient, resulting in a hidden profit distribution. According to the Swiss rules and doctrine, transactions between related parties must be consistent with the arm’s length principle.

For the third-party comparison, the Court relied on the long-term interest rates, even if the cash pool balances were correctly accounted for as short-term loans. The basis for the third-party comparison for the cash pool interest rate was determined to be the market interest rate measured on the 5-year SWAP rate.

The Court decision was partial approval of A AG and refusal to the Tax administration.

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Swiss SB.2005.00005