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An analysis by Taxpartner AG, Taxand Switzerland
In a recent landmark ruling, the Zug Administrative Court has confirmed that Swiss tax law requires each financial year to be assessed independently, prohibiting retroactive margin ‘smoothing’ across multiple years.
The case involved a pharmaceutical group who had attempted to justify a significant 2018 loss using a three-year average under OECD transfer pricing guidelines. However, the court upheld the periodicity principle, rejecting the company’s argument and the proposed year-end adjustment. The decision reinforces that transfer pricing must reflect the economic outcome of each individual tax year, without retrospective compensation for earlier overstatements.
Monika Bieri and Patrick Bieri from our Swiss member firm Taxpartner AG have published a more detailed analysis of the ruling and its implications here.
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