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TPS Newsletter – January 2024

Switzerland: the Federal Tax Administration (FTA) has published a guide on interest rates applicable to financial transactions.

Swiss companies that lend money to related parties should pay close attention to new guidelines issued by the Federal Tax Administration (AFT) at the end of January 2024. This circular establishes a “safe harbor” for interest rates, which ensure that transactions are considered arm’s length for tax purposes.

  1. Interest rates for loans to shareholders/related parties in Swiss francs (CHF)

Minimum interest rates

Loans financed with equity: Minimum interest rate of 1.5%.

Debt-financed loans: Interest based on the cost of debt plus a surcharge (0.5% for loans under CHF 10 million, 0.25% for larger loans), but always at least 1.5%.

Maximum interest rates

Real estate loans: Rates range from 2.25% to 3.5% depending on the type of loan and level of indebtedness.

Operating loans: Commercial/production companies: 3.75% for loans up to CHF 1 million, 2.0% for higher amounts.

Holding companies: 3.25% for loans up to CHF 1 million, 1.75% for higher amounts.

  1. Interest rates for loans to shareholders/related parties in other currencies (EUR, USD)

Loans financed with equity: Minimum 2.5% for EUR, 4.25% for USD.

Debt-financed loans: Interest based on the cost of debt plus 0.5%, but never less than 2.5% for EUR or 4.25% for USD.

Companies may agree to pay higher interest rates than those indicated if they can demonstrate a valid business reason for doing so. In this regard, documentation is required to support this justification.

Colombia: The National Government has published a decree modifying the due dates for the submission of formal transfer pricing obligations for fiscal year 2023 and subsequent years.

Decree 2229, dated December 22, 2023, significantly tightens the deadlines for the submission of formal transfer pricing obligations.

Under the new rules, the filing deadline is set in a window between September 7 and 16 of the following year.

This new deadline applies to the following formal obligations:

  • Informative statement;
  • Country-by-country notification;
  • Local Report; and
  • Master Report.

The date for submission of the Country-by-Country Report is established on the tenth working day of December of each year.

Italy: Legislative Decree 1/2024 introduces a change in the corporate income tax filing date that impacts transfer pricing documentation

Legislative Decree 1/2024 published on January 12, 2024 introduces a new tax calendar, in which the filing date for corporate income tax is reduced from 11 to 9 months after the end of the tax year, being applicable for the 2023 tax year.

This new schedule has a direct impact on the completion of the transfer pricing documentation, as from now on, it will have to be ready by September.

To avoid possible penalties, Italian taxpayers whose tax year coincides with the calendar year must prepare the transfer pricing documentation, duly digitally signed and electronically stamped, before September 30.

TPS has prepared a specific article explaining in more detail the changes introduced.

Article TPS

France: a new Finance Law was published on December 29, 2023, which introduces some changes that impact the preparation of transfer pricing documentation.

 The new Finance Law introduces the following amendments:

  • Minimum penalties applicable in cases of incomplete transfer pricing documentation are increased from 10,000 to 50,000 euros;
  • The Group’s turnover threshold for the preparation of transfer pricing documentation has changed from EUR 400 million to EUR 150 million.

TPS has prepared a specific article explaining in more detail the changes introduced.

Article TPS

Malta: On January 19, 2024, the Malta Revenue and Customs Administration amended the transfer pricing rules for related party transactions and tax periods commencing on or after January 1, 2024.

As of now, agreements existing prior to January 1, 2024 will only be exempt from the transfer pricing rules until January 1, 2027. In simpler terms, even agreements prior to 2024 will have to comply with the transfer pricing rules as of 2027, provided they have not been significantly modified.

The Maltese tax authorities will take into account whether changes in the functions performed, the assets used, or the risks assumed by the parties involved have significantly affected the pre-existing arrangements.

TPS has prepared a specific article explaining in more detail the changes introduced.

Article TPS

United States: The IRS has issued a memorandum on the agency’s position on the impact of group membership in determining the interest rate on intragroup loans.

The Internal Revenue Service (IRS) has issued an important memorandum, clarifying the agency’s position on the impact of group membership in determining the arm’s length interest rate applicable to intragroup loans.

From now on, the agency will take into account the “implicit support” provided by a corporate group when determining the arm’s length interest rate for intra-group loans.

This means that, even in the absence of a formal guarantee, the IRS will evaluate whether an unrelated lender would consider the borrower’s membership in the group as a factor that would justify a more favorable interest rate. In such a case, the IRS may adjust the interest rate on the loan to reflect the implicit benefit received by the borrower.

The report stresses the importance of a case-by-case analysis.

Once again, the importance of the correct delineation of the financial operation and the correct calculation of the credit rating, taking into account the positive effects of a possible implicit support from the Group, is highlighted.

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