The case

The Federal Court’s ruling relates to how loan interest within a corporate group is to be dealt with regard to taxes and how the safe-harbour interest rates, determined by the tax authority, are to be regulated so that they are in line with the circular letter of the Federal Tax Authority (EStV).

Source: Bundesgericht, I 7. Juli 2024, 9C-69012022 /ZStP 4/2024 page 304 ff​.

The commentary

The concept of safe-harbour interest rates serves as a guideline for what are considered acceptable interest rates with regard to taxes.

In principle, tax authorities accept interest rates that are within the scope of the rates as defined in the circular letter. Tax payers have to stick by the safe harbour interest rates, provided that they have not agreed on different interest rates, which must be in keeping with the arms-length principle.

In cases where the tax payers have agreed on higher interest rates they must prove that the arms-length principle meets the criteria of conformity, i.e. that they are in line with the market and meet the criteria agreed on between independent parties. If the arms-length principle cannot be proved, the tax authorities are not obliged to stick to the safe-harbour interest rates but can determine their own interest rate that is in line with the market. They may even determine an interest rate in line with the market that is below the maximal permissible safe-harbour interest rate.

This procedure is based on legal provisions, particularly § 64 Abs. 1 Ziff. 2 lit. e StG (Staatssteuer Kanton ZH) und Art. 58 Abs. 1 lit. c DBG (Direkte Bundessteuer).

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