Automatic exchange of rulings Amendment of the administrative tax assistance ordinance (OAAF)

The automatic exchange of rulings represent one step closer towards the international tax transparency. Through this expansion of the automatic exchange of information, the States which host the parent company or a subsidiary concerned by a ruling of a foreign State will automatically be informed of the tax agreements made between the companies of a group and the foreign tax authorities. Therefore, this exchange will allow the States to better understand the global tax situation of a group and thus, potentially challenge the transactions between related entities.

The legal basis for the exchange

On October 15, 2013, Switzerland has signed the Convention of the European Council and of the Organization for Cooperation and Economic Development (OECD) covering the mutual administrative assistance on tax matters. The Article 7 of this Convention provides situations in which a spontaneous exchange of information, which means without prior request, must take place between the authorities of the concerned States. Following the signature, an amendment of the federal law on the administrative tax assistance has been approved by the Federal Parliament. The amendment of the law is entered into force on January 1st, 2017, without referendum.

The revised LAAF provides that the Federal Council works out the details of the spontaneous information exchange by way of ordinance. In order that the provisions of Ordinance are published before the entry in force of the law and of the agreement, the Federal Council has undertaken a total revision of the Ordinance. Its final version has been enacted in autumn 2016.

The Ordinance is based on the Article 22a LAAF. It provides that the Federal Council works out the details based upon the international standards and the practice of the States. The standards of the action plan of the OECD against the base erosion and profit shifting (BEPS) represents such an international standard.

The information that will be transferred to other countries

The principal idea is to fight the damageable practices by increasing the transparency. If a group of companies is active in several countries and obtains guarantees from a State regarding a future tax treatment, by submitting automatically the document to the tax authorities of the other concerned countries, these tax authorities will have a better tax view of the global structure of the group. Indeed, the Ordinance provides in its Article 8 that the rulings are subject to the obligation of the spontaneous exchange, except for cases of minor importance. Concretely, such an information or such guarantees are considered as ruling if they meet the following conditions: 1) the decision has to be rendered at the request of a taxpayer, 2) it focuses on the tax consequences of presented facts by a taxpayer and 3) the tax authority is bound by its answer.

However, the ruling has to be in a certain category to be exchange. Indeed, the Article 9 of the OAAF provides the categories covered by the exchange. The following rulings are subject to the exchange:

  • Rulings in connection with the preferential arrangements (that would probably be in effect until 2019, cf. our Newsletters regarding the Corporate Tax Reform III);
  • Rulings in connection with transfer pricing in a cross-border context;
  • Rulings that allow, in a cross-border context, a reduction of the taxable basis in Switzerland that is not mentioned in the annual accounts;
  • Rulings on the existence or not of permanent establishments;
  • Rulings that deal with a cross-border flow of income or of transferred funds from associated companies in other States through Swiss companies.

The rulings will be subject to the spontaneous exchange from 2018 if they have been concluded after the

1st January, 2010 and are still valid on January 1st, 2018. Rulings concluded before the 1st January 2010 or after but which are no more in effect on January 1st, 2018 won’t be exchanged. The ruling itself is not exchanged. Only information which allows to understand the purpose and the effect of the ruling. The content of the ruling can be obtained via a formal request of information from the other State.

Only a bilateral activation of a spontaneous exchange agreement could change this deadline. Indeed, the spontaneous exchange presented in this Newsletter is entered into force through the Multilateral convention on Mutual Administrative Assistance in Tax Matters. However, there is another mechanism which can activate the automatic exchanges through bilateral agreement with another State. So, if such an agreement would be signed at the present time with a partner country, it could lead to early exchange of rulings.

How and to whom are the rulings exchanged

In the first step, the information on the ruling is transferred to the Swiss exchange information service on tax matters (SEI) by the cantonal tax authorities. Then, it transfers that information to the foreign authorities.

However, this office performs a control before transferring the information and can also delay or even block the transfer of the information if some conditions are met. For example, Switzerland can require the reciprocity of the recipient country for the exchange.

The rulings are transferred to the country where resides:

  • the parent company of the concerned company;
  • the ultimate parent;
  • the subsidiaries (participation of at least 25%) for which transactions are concerned by the ruling.


The spontaneous exchange of the tax rulings is just a part of the new international transparency system. However, it represents an important step because an essential tool of the aggressive tax planning is neutralized: the secret. Indeed, if the profit transfer or the reduction of the taxable basis is obtained in a country, where the tax is advantageous, by a ruling, this will be communicated to the other countries. Actually, the ruling’s exchange is also a measure to reinforce the principle of free competition, which is an essential tool to fight the tax driven structures that are often developed by multinationals through important means.

However, the rulings’ exchange involves also some risks. For example, for the Swiss companies of a group, which benefit from a special status since January 1st, 2010 that is still in force in 2018, the risk exists that some foreign States, informed of the status of those companies, review the taxable margin of related companies in their own country for past years. Moreover, with the other new international measures that try to limit the aggressive tax planning, many cases of double taxation could result of such exchange.

For any questions regarding the subject, we invite you to contact Mr. Daniel Spitz, certified tax expert, by phone to the 021 311 00 21, or by e-mail to [email protected]

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