Insights

Transfer prices must comply with the arm’s length principle, according to which transactions between affiliated companies should follow the same conditions that would be agreed between third parties. The Swiss legislator has not enacted any specific laws on transfer pricing. However, the arm’s length principle is implemented on the basis of various provisions in tax laws.

The FINMA requirement for explainability of AI-supported business models in the financial industry presents auditors with new challenges.

Stablecoin issuance projects have become increasingly important since 2019. In the new FINMA Guidance 06/2024, the supervisory authority provides information on the financial market law aspects of stablecoin projects and their impact on supervised institutions. In particular, FINMA defines certain minimum requirements for default guarantees from banks, which are often used by stablecoin issuers so that they are not subject to authorisation under banking law. FINMA also draws attention to the increased risks of money laundering and terrorist financing as well as the circumvention of sanctions and specifies the due diligence obligations of stablecoin issuers under anti-money laundering law.

The Federal Supreme Court has clarified in two recent rulings that financial transfers within the same municipality are not to be classified as subsidies. Based on these rulings, municipalities should review how such financial transfers are treated for VAT purposes and assess the potential impact of this new VAT classification on their autonomous departments.

Preventing greenwashing is becoming one of the key tasks for ensuring credibility and trust in the financial market.

On 4 September 2024, the Federal Council decided to introduce the GloBE Income Inclusion Rule as of 1 January 2025 that supplements the OECD/G20 minimum taxation as in force since 2024.

According to commercial law, a corporation may acquire its own shares provided it has freely disposable equity in the amount of the acquisition value and the nominal value of the own shares does not exceed 10% of the share capital according to the commercial register. If the acquisition is in connection with a restriction on transferability, the maximum limit is 20%. Shares acquired in excess of 10% must be sold within two years or canceled through a capital reduction.

A taxpayer had a debt to a Swiss limited liability company/GmbH held by him, for which the cantonal tax authorities had refrained from claiming a personal taxable income under certain conditions communicated in writing and accepted by the taxpayer. The taxpayer/borrower subsequently breached these conditions with the result that the cantonal tax authorities qualified the loan receivable as a simulated loan.

The importance of operational risk management for financial institutions continues to grow. On June 12, 2024, FINMA published Guidance 04/2024 on the management of operational risks of fund management companies and managers of collective assets. This communication underlines the regulator's efforts to strengthen risk management among all supervised financial market participants and presents possible measures for the institutions concerned. Our article summarizes the key measures and highlights their potential impact on financial institutions that are not directly covered by the supervisory communication.

The number of successful cyber attacks has been increasing for years. Cyber attacks are therefore one of the main risks for FINMA-supervised institutions. The new FINMA Guidance 03/2024 now describes specific requirements for dealing with cyber risks and answers common questions about reporting obligations. Although it is aimed at larger and more highly regulated institutions such as banks, the principles are also applicable as a guidance to smaller and medium-sized portfolio managers (Art. 17 of the Financial Institutions Act [FinIA]). In particular, the boards of directors of the institutions must also be prepared.

An indirect partial liquidation clause is standard in share purchase agreements. However, buyers are well-advised to carefully plan the acquisition of a Swiss target company as well as the subsequent integration and prepare together with sellers a defensive argumentation to disprove application of the indirect partial liquidation theory.

The Swiss federal supreme court recently confirmed the long-standing practice that hidden profit distributions are committed by submitting incorrect annual financial statements to the Swiss federal tax authorities.

At the end of May 2024, the Federal Council submitted the dispatch on the further development of the fight against money laundering to Parliament. The main objectives of the bill are the introduction of a transparency register for legal entities and the introduction of AML due diligence obligations for lawyers and advisors. The proposed legislation represents a significant adjustment to meet the increasing international requirements for combating money laundering and terrorist financing.

This article informs you about the recently published draft of the new FINMA circular on the duties of conduct under the FinSA (Financial Services Act). On the one hand, this circular represents an important step towards further clarifying the existing regulations and facilitating their practical implementation; on the other hand, its implementation will lead to a need for adaptation on the part of most financial service providers. The Swiss Financial Market Supervisory Authority (FINMA) is ultimately aiming to increase legal certainty for financial service providers and improve investor protection.

There are currently interesting developments in Anti-money laundering legislation in the European Union (EU). The crypto sector and dealers of luxury goods such as cars, works of art, yachts, jewellery, etc. will be affected heavily by the future regulations. Professional football clubs and agents are also expected to be affected. In addition, an EU-wide upper limit for cash payments of a maximum of EUR 10,000 and a new EU authority to combat money laundering are to be created. This article outlines the most important changes at EU level, which could also have an impact on Swiss Anti-money laundering legislation in the medium term.

What asset managers of collective assets need to know about the new regulations.