Swiss Safe Harbour Intercompany Interest Rates for 2025 Announced

On 27 and 28 January 2025, the Swiss Federal Tax Administration (“SFTA”) published the Swiss safe harbour interest rates applicable for the year 2025, 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.

Scope

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 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 2026, the new interest rates will apply from January 2026 and therefore the 2025 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 2025 apply retroactively as of 1 January 2025.

Interest Rates for IC Loans and Advances in Swiss Francs (CHF)

The 2025 minimum interest rates on CHF-denominated loans granted by a Swiss resident company to a shareholder or related party generally are as follow below:

This outlines a decrease of the CHF minimum lending rates for 2025 of 50 basis points (“bps”) when compared to 2024.

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:

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

Interest Rates for IC Loans and Advances in Foreign Currencies

The table below shows the safe harbour interest rates by currency, applicable for 2020 to 2025. We note that for 2025 we can see some significant increases across the board, while some remained unchanged.

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., 1.00% for 2025), then this higher rate must be charged, working as a second floor. As all the interest rates disclosed in the above table are higher than the CHF safe harbour rate, this second floor has no practical effect for 2025. Therefore, the minimum applicable interest rates will be those shown in the table above.

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. 213. Therefore, for operating loans up to the equivalent of CHF 1 million or less, the spread amounts to 2.50% in case of trading and manufacturing companies as borrowers, and to 2.00% for holding and asset management companies as borrowers. For advances and IC loans exceeding the equivalent of CHF 1 million, the applicable spread is 0.75% and 0.50%, respectively.

Deloitte’s View

Our key observation from the latest Circular Letters is that the 2025 Swiss safe harbour interest rates for CHF intercompany loans and advances have decreased when compared to 2024, in an effort to reflect the expected market interest rate developments. For intercompany loans and advances in foreign currencies, the 2025 Swiss safe harbour interest rates have generally increased. Noteworthy changes include an increase of 525 basis points for loans denominated in BRL and an increase of 175 basis points for loans denominated in HUF. Conversely, the safe harbour interest rate for loans denominated in CNY has significantly decreased by 100 basis points, reflecting China's substantial reductions in its key interest rates during the last quarter of 2024.

The decrease of 50 bps for the safe harbour interest rates related to Swiss franc (CHF) IC loans and advances mirrors the Swiss National Bank’s (“SNB”) 50 bps cut in its interest rate in December 2024 – the largest reduction in nearly a decade. Through this monetary policy, the SNB aims to counteract the weaker-than-expected inflation in Switzerland.

Given that volatility in the markets is expected to persist throughout 2025, 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, in such cases, the burden of proof is reversed and, thus, 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 benchmarking studies in line with the requirements of Chapter X 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.

In a recent decision (9C_690/2022, in German), a five-judge panel of the Swiss Federal Supreme Court ("Bundesgericht") dealt with the question of the types of taxes to which the annual circular on safe harbour interest rates annually issued by the SFTA applies, and whether and to what extent the circular is binding on tax administrations. The court clarified that the SFTA circular applies to Direct Federal Tax and Withholding Tax, as well as Cantonal and Municipal Taxes and it also clarified the conditions under which the safe harbor rates are binding on tax administrations. The Federal Supreme Court took a «quid pro quo”-view: Only if the taxpayer complies with the rates are they binding on the tax administration. If the taxpayer does not comply, the tax administration can ignore the circular and determine an arm's length interest rate as part of the assessment. Please refer to our Deloitte Blogpost that further details this case.

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.

Authors

• George Galumov - Partner, Transfer Pricing Financial Transactions Leader
• Markus Reese - Partner, Transfer Pricing and M&A
• Thomas Hug - Partner, National Tax Office
• Barbara Brito - Manager, Transfer Pricing