transfer pricing

The Federal Tribunal rarely considers the issue of transfer pricing.

The context is particular in that, in the case in question, it concerns a mixed-economy company performing a task of public interest within the meaning of Art. 58 para. 3 LIFD and 24 para. 5 LHID. Did the company grant any appreciable monetary benefits to its shareholders?

The aforementioned topical legal provisions provide for three methods for determining net profit:
current market price
👉 cost plus
current final selling price less a profit margin.

❌ the law does not establish a hierarchy between methods; cost-plus is, however, most often used in practice (recommended by legal scholars), particularly for long-term relationships (see 2.3.4)

✅ The general provision referring to commercial use (Art. 58(1)(b), fifth indent, of the FIDL) is also applicable (consideration 2.3.5)

❌ an interpretation in accordance with Article 9 of the OECD Model Tax Convention is not required; at most, it may be used as a subsidiary guide (recital 2.3.6)

✅ enter into the «current cost of production»:
1️⃣ All operating expenses (see 2.3.8)
2 All financial expenses (see 2.3.8)
3️⃣ and taxes (see 3.4.s ff)
❌ but not charges unrelated to operations, nor extraordinary charges (see 3.4.6)

✅ A return on equity (and on all equity – para. 3.5.12) of 5.01% is an appropriate long-term return (para. 3.5.11)

✅ The mark-up (cost+) ranges from 5.0% to 10.0% depending on the sector (para. 3.6.1); in this case (energy production), it is 5.0% (para. 3.6.2)

A publication in the ATF is planned. The judgment is in German. It concerns a case from Grisons.

Federal Tribunal, judgment 9C_37/2023, of 11 June 2024