Export Knowhow

Transfer pricing: customs require compliance

Recently, intercompany pricing structures have been audited more frequently. If enterprises use transfer prices as customs value when importing goods, they need to be compliant from a customs perspective; otherwise they may risk penalties and high reassessments.

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Current situation

The export market is an important driver for revenues and profit for Swiss SMEs. Once an enterprise operates with a presence outside Switzerland, customs related topics such as transfer pricing and customs values become relevant. 

The customs value is determined following fixed rules on customs valuation and corresponds to the price actually paid or payable. Where there is no movement of own goods or where the price paid for the goods is influenced by the relationship between the buyer and seller, the value must be determined using an alternative method. 

In most countries the customs value of goods is the calculation basis for customs duties (only Switzerland uses weight or pieces as a basis). In intercompany transactions, this value can be determined based on the intercompany transfer prices, which are accepted from a customs perspective if it can be demonstrated that they are not influenced by the relationship between the parties. However, it might not always be correct to use the transfer price as customs value, as the latter focuses on the value of goods as such, while the transfer price may additionally include embedded services and intangibles. Furthermore, the value of the goods has to be determined at the time of the import.

Custom values and transfer pricing

In order to test the arm’s length character of intercompany transactions, the most appropriate transfer pricing method has to be determined. The Comparable Uncontrolled Price Method (CUP) is oftentimes not applicable, because differences between related and unrelated parties materially affect the price in the open market or reasonably accurate adjustments cannot be made. The Transactional Net Margin Method compares e.g. the EBIT margin of the group distribution entity with the interquartile range of its benchmark. If the same transfer prices are applied for all group distribution entities despite differences in the markets, the entities’ results may vary significantly. As a consequence, enterprises may apply different prices for the same goods charged to group distribution entities (or to third party distributors). In addition, they need to manage the transfer prices periodically, e.g. with price adjustments, which usually entails an obligation to report these to the customs authorities in the country of importation and the payment of additional customs duties. 

In-depth audits have been increasing 

Recently, the frequency of in-depth audits of intercompany pricing structures, especially in Germany and the Netherlands, has been increasing, even if the companies can prove a full and documented Swiss origin status for their goods. Hence, there is an increased risk for Swiss companies if using transfer prices as customs value. The wrong customs value might lead to fines or penalties and to high reassessments.

It is highly recommended that enterprises use the correct customs values when importing goods. In case of transfer pricing adjustments and fluctuation in pricing, it is recommended to explain the transfer pricing policy of the enterprise to the customs authorities in the country of importation. If the customs authorities do not accept the transfer price as a basis for customs value or if the transfer price is not suitable as a basis for the determination of the customs value, e.g. because of transfer pricing adjustments, one option could be to use two different values, i.e. one for transfer pricing and another for customs valuation purposes.


In conclusion, enterprises have to be compliant from a customs perspective in order to minimize risk regarding penalties or reassessments in this regard.

The alternative valuation methods are:

  1. value of identical or similar goods imported at about the same time
  2. a “deductive value” based on the sales price after import less an appropriate allowance for post import activities (similar to the OECD “re-sales minus” method)
  3. a “computed value” based on the cost of producing the goods before import plus an appropriate amount for profit and general expenses (similar to the OECD “cost plus” method)
  4. fallback method
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