2021 Swiss safe harbor interest rates for intra-group loans – EUR and USD rate reduced
On 28 and 29 January 2021 the Swiss federal tax administration (SFTA) published the safe harbor interest rates for the year 2021. The rates apply to intra-group loans, denominated in Swiss Francs and foreign currencies, as of 1 January 2021. A deviation of the applied interest rates remains possible by means of a third party comparison, i.e. if the interest rates are at arm’s length.
Base rates for CHF denominated loans (see circular letter) remained unchanged from previous years. Due to the current interest rate environment, base rates for non-CHF denominated loans (see circular letter) have changed in some cases. Most importantly, the EUR safe harbor rate has been lowered even further to 0.25% and the USD safe harbor rate has been reduced to 1.25%. Due to the reduced rates for EUR and USD denominated loans, we expect more scrutiny and follow-up questions by Swiss tax authorities during tax assessments or audits if Swiss taxpayers apply higher rates.
For non-CHF denominated loans the interest spread (taxable margin) subject to tax on Swiss level is still 50 bps (i.e., interest spread between related party loan receivables and payables).
The possibility to add an interest spread to the maximum rate is maintained. For loan amounts up to 1 million Swiss taxpayers can add a spread of 2.75% (operating activities) or 2.25% (holding activities), for loan amounts exceeding 1 million a spread of 0.75% (operating activity) or 0.50% (holding activity). For instance, for large USD denominated loans the weighted average rate could be approx. 2.00%, i.e., 1'000'000 x [1.25% + 2.75%] + (principal amount ./. 1'000'000) x [1.25% + 0.75%].
Due to the reduced rates for EUR and USD denominated loans, we expect more scrutiny and follow-up questions by Swiss tax authorities if Swiss taxpayers apply higher rates.
Furthermore, the application of unilateral safe harbor rates falls under hallmark E of the DAC 6 mandatory disclosure rules of the EU. Swiss companies applying the Swiss safe harbor interest rates on transactions with group companies domiciled in an EU member state should therefore be aware that these transactions might be reportable under DAC 6.
You can check the Swiss safe harbor interest rates for Swiss Franc (CHF) denominated transactions and for Non-CHF denominated transactions in the pfd-version.
Rebecca KühneAssociate Swiss certified tax expert
Rebecca Kühne, Swiss certified tax expert, is an associate in our Zurich office. She also focuses on Swiss VAT matters and supports clients in the context of non-contentious procedures.T: +41 43 434 67 34 M: +41 79 814 06 19 E: email@example.com
Livia GeissmannAssociate Tax adviser
Livia Geissmann, tax adviser, is an associate of the Zurich office. She focuses on Swiss and international taxation as well as succession planning for Swiss and foreign (ultra) high-net-worth private clients and family owned businesses.T: +41 43 434 67 28 M: +41 79 42 82 245 E: firstname.lastname@example.org