On 29 and 30 January 2024, the Swiss Federal Tax Administration (“SFTA”) published the Swiss safe harbour interest rates applicable for the year 2024, both for intercompany (“IC”) loans and advances denominated in Swiss francs (German / French / no English version) as well as in foreign currencies (German / French/ no English version). These rates are used by the SFTA to assess the arm’s length nature of interest rates on intragroup loan receivables or payables and provide a level of tax certainty from a Swiss tax perspective, in absence of a bespoke arm’s length comparability analysis. Although not explicitly mentioned, these safe harbour intercompany interest rates only apply in practice to financial transactions with a term of more than 12 months, as recently stated by the Cantonal Administration Appellate Court of Zurich in a new decision (SB.2023.00014, in German). It should also be noted that these interest rates are only binding until the next publication. If the interest rates change in 2025, the new interest rates will apply from January 2025 and therefore the 2024 rates cannot be used for financial transactions with a fixed interest rate over a specific period of several years.

The safe harbour interest rates for 2024 apply retroactively as of 1 January 2024.

2024 Safe harbour interest rates for Swiss franc (CHF) IC loans and advances

The 2024 minimum interest rates on CHF-denominated loans granted by a Swiss resident company to a shareholder or related party generally are as follows below:

This indicates the CHF minimum lending rates for 2024 remained unchanged when compared to 2023.

For loans denominated in Swiss Francs, received from shareholders and affiliated parties, the maximum interest rates payable by Swiss entities are calculated based on the minimum lending rate in CHF increased by a specific spread, as follows:

¹ 0.25% decrease when compared to 2023.

It should also be noted that different interest rates apply to real estate loans.

2024 Safe harbour interest rates for IC loans and advances in foreign currencies

The table below shows the safe harbour interest rates by currency, applicable for 2019 to 2024. We note that for 2024 we can see some significant rate cuts across the board, while some remained unchanged.

where, “n.a.” stands for “not available”.

The interest rates depicted in the table above apply to advances and IC loan receivables which are equity-financed. For debt-financed receivables, the respective third-party or related party debt financing costs (%) plus a margin of 0.50% applies, subject to the minimum corresponding rate disclosed in the table. However, if the CHF safe harbour rate is higher (i.e., 1.50% for 2024), then this higher rate must be charged, working as a second floor.

For the determination of the maximum interest rate for IC loan payables under the safe harbour rules, a spread is to be added to the interest rates depicted in the table. The spread is stipulated by reference to the operating loans under paragraph 2.2 of the Circular No. 207. Therefore, for operating loans up to the equivalent of CHF 1 million or less, the spread amounts to 2.25% in case of trading and manufacturing companies as borrowers, and to 1.75% for holding and asset management companies as borrowers. For advances and IC loans exceeding the equivalent of CHF 1 million, the applicable spread is 0.50% and 0.25% respectively.

Deloitte perspective – implications and recommendations

Our key observation from the latest Circular Letters is that the 2024 Swiss safe harbour interest rates have either remained unchanged or decreased when compared to 2023, in an effort to reflect the expected market interest rate developments. One notable exception to this is the rate for USD, which increased from 3.75% to 4.25%. After last year’s wave of hyperinflation and monetary tightening by major central banks (with significant hikes in interest rates), central banks are now expected to cut rates if no inflationary shocks happen in the near future.

Given that volatility in the markets is expected to persist throughout 2024, even if lower than in previous years, there may be differences between the Swiss safe harbour interest rates and the external debt financing costs at which multinational companies are able to finance their operations. This may put pressure on multinational companies which are relying on safe harbour rates to defend their position in Switzerland. The application of such rates can also have an impact on the transfer pricing consideration of other jurisdictions party to the transfer pricing arrangements.

In this regard, we would like to note that a taxpayer can apply an interest rate that deviates from the published safe harbour rates. This possibility has, in fact, been reinforced by the detailed paper issued by the SFTA on January 23, 2024 (German / French/no English version) – section 2.2.2. However, for such an interest rate to be accepted by the Swiss tax authorities, the taxpayer would have to demonstrate that the interest rate applied meets the arm’s length standard. In practice, this would require performing appropriate transfer pricing analyses of comparable third-party arrangements in line with the requirements of Chapter 10 of the OECD Transfer Pricing Guidelines.

Non-compliance with the arm’s length principle can lead to negative tax consequences in Switzerland, such as recharacterization of the interest as a hidden profit distribution subject to Swiss withholding tax at a rate of 35% (grossed up to 53.8% if not borne by the recipient), and being add-back to taxable income.

Lastly, it should be noted that transfer pricing is becoming increasingly more important for tax administrations in Switzerland, with courts ruling on more and more transfer pricing cases each day. The recent detailed paper issued by the tax administrations on January 23, 2024 also sheds light upon financial transactions, emphasizing the importance of considering credit ratings when setting interest rates.

Recently, the Cantonal Administration Appellate Court of Zurich issued a new decision (SB.2023.00014, in German) on the topic of arm’s length interest rates and the use of the safe-harbour interest rate circular in the context of a cash pooling arrangement. Among others, the present case highlights an important take-away: the taxpayer did not provide any benchmarking studies to support their interest rate determination. As a result, the court deemed the use of the safe-harbour interest rates circular proposed by the Cantonal Tax Administration of Zurich as an acceptable method for determining the applicable interest rate. This underscores the importance of providing adequate evidence to prove the interest rate applied meets the arm’s length standard and the potential consequences of failing to do so.

If you would like to discuss any aspect of transfer pricing for loans or other types of financial transactions such as guarantees, cash pooling, hedging or captive insurance, please reach out to our Transfer Pricing experts at Deloitte. See contacts below.

Key contacts

George Galumov - Partner Transfer Pricing Financial Transactions Leader Email	Thomas Hug - Partner National Tax Office Email
Martin Krivinskas - Partner International Tax & Transfer Pricing Email	Markus Reese - Partner Transfer Pricing and M&A Email
Jan Stiplovsek - Senior Manager Transfer Pricing Email