Swiss Court Rejects Multi-Year Margin Averaging in Transfer Pricing Analysis

September 2025

A recent Swiss transfer pricing case examined whether taxpayers can rely on multi-year margin averaging when assessing compliance with the arm’s length principle. The dispute concerned the use of several years of financial results in a benchmarking analysis, rather than evaluating profitability on a year-by-year basis.

The taxpayer argued that multi-year data provides a more reliable measure of economic performance by reducing the impact of temporary market fluctuations and exceptional results. This approach is commonly used in transfer pricing analyses to improve comparability between tested parties and independent companies.

The Swiss court, however, emphasized the annual accounting principle, holding that each tax year should generally be assessed independently. The court found that lower profitability in one year cannot automatically be offset by stronger results in other years when determining whether a transaction meets the arm’s length standard.

The decision raises broader questions about the role of multi-year data in transfer pricing and the interaction between domestic tax law principles and OECD guidance. It also highlights the increasing focus of tax authorities on the reliability and consistency of benchmarking studies.

The case serves as a reminder that taxpayers should carefully assess local requirements when applying multi-year data and ensure that transfer pricing positions are supported by robust year-specific documentation.

For full English translation, access this link: The periodicity principle v OECD guidance: Swiss court rejects multi-year margin averaging | International Tax Review