Why related parties need extra attention
In a Swiss SME, related-party transactions are everyday occurrences: rent for a shareholder's property, consulting invoiced by an affiliated company, an intragroup loan, purchasing goods from a supplier controlled by the manager's family. Company law (CO) requires governing bodies to act in the company's interest; when the other party is linked through control, family ties or economic influence, the risk increases that prices, terms or the absence of a contract do not reflect the market.
For the auditor and the Federal Tax Administration (FTA) it is not enough to record a payment in the accounts: evidence is needed showing the nature of the transaction, internal approval, a plausible price and consistency over time. A hidden profit distribution (verdeckte Gewinnausschüttung) or a non-deductible expense can result from below-market rents, missing interest or undocumented services.
This guide explains how to structure written contracts, apply the arm's length principle and build an accounting trail that withstands a tax audit or an ordinary audit — without replacing advice from your trustee or auditor.
Who related parties are in SME practice
There is no single list in the Code of Obligations for every transaction; accounting (Swiss GAAP FER / professional standards) and tax law converge on concepts of control, significant influence and close family ties. For audit and tax filing purposes it pays to map systematically:
| Category | Typical SME examples | Minimum expected documentation |
|---|---|---|
| Shareholders | Rent, shareholder–company loans, know-how transfers, dividends in kind | Contract, resolution, dedicated statement of account, price justification |
| Close family members | Spouse as landlord, child as consultant, parent as supplier | Same standard as for third parties; conflict-of-interest declaration |
| Group companies | Management fees, royalties, centralised purchasing, internal factoring | Intragroup agreement, cost allocation, VAT-compliant invoice |
| Governing bodies and key personnel | Sole manager with dual role, director in a supplier company | General meeting/board approval, related-party transaction register |
| Holdings with significant influence | Joint venture, investment with commercial veto rights | Partnership or association agreement, documented risk and margin sharing |
The map should be updated when shareholders, articles of association or group structure change. Accounting software such as Accountex helps by linking master data (suppliers/customers tied to shareholders) to cost centres and digital attachments, so every entry remains traceable years later.
Written contracts: clauses that matter
A verbal agreement between an entrepreneur and their own company is fragile in an audit. A written contract — even a short one — fixes the subject matter, term, consideration, billing method and termination. Useful elements for auditors and the FTA:
Leases and use of assets
State floor area, permitted use, index or reference to the local market (e.g. cantonal property comparables), allocation of ancillary costs (Nebenkosten) and extraordinary maintenance. Attach a floor plan or inventory where relevant.
Avoid symbolic or free rent: if the company saves a market cost, the tax authority may impute a taxable benefit to the shareholder.
Services
Define scope (hours, deliverables, SLA), hourly or fixed fee and who bears out-of-pocket expenses. For services from affiliated companies, describe the allocation basis (FTE, revenue, allocation key).
The invoice must match the contract; recurring deviations without an addendum raise questions in an audit.
Financing and receivables
Amount, term, rate (fixed or variable with reference), security, subordination and repayment schedule. Document any waiver of interest as a deliberate decision by the governing bodies.
Long-term unpaid shareholder loans may be reclassified for tax purposes; the accounting trail must show due dates and accrued interest where applicable.
Asset transfers and royalties
Specify rights transferred (trademark, software, customer base), territory, exclusivity and consideration (lump sum, percentage of revenue). For material contributions in kind, valuations and appraisals should be filed.
VAT consistency: taxable supplies must be invoiced at the correct rate even if the counterparty is related.
Arm's length pricing
The arm's length principle requires that economic terms between related parties do not differ materially from those that would apply between independent parties in comparable circumstances. In Switzerland SMEs are not generally subject to a master file obligation as in multinational transfer pricing; adjustments for transactions not commercially justified remain relevant, including hidden profit distributions (Art. 58 para. 1 DBG; profit tax: converging cantonal rules). The FTA has published transfer pricing guidelines (2024), especially useful for groups and cross-border cases.
For recurring transactions (rent, management fees, interest) it is advisable to keep at least a calculation note: two or three market quotes, sector indices, cantonal bank rate data, or documented internal benchmarks. A multinational-style dossier is not required; plausibility and year-on-year consistency are.
| Transaction type | Risk signal | Pragmatic documentation approach |
|---|---|---|
| Shareholder property rent | Rent materially below local market | Annual comparison with listings or summary appraisal; contractual adjustment |
| Intragroup consulting | Fee with no timesheet or deliverables | Time records, activity description, rate aligned with external market |
| Company → shareholder loan | Zero interest on a material amount | FTA tax-recognised rates (safe harbour) or proof of market rate; accrue interest if tax-relevant |
| Sale of goods at cost | No margin to a related entity | Written pricing policy; documented minimum mark-up |
Internal governance and conflicts of interest
Arts. 716a and 717 CO require governing bodies to act with due care and loyalty in the company's interest; Art. 717a CO governs board conflicts of interest in AGs. Disproportionate benefits to shareholders or persons close to them can give rise to restitution (Art. 678 CO). Even in an GmbH with a sole shareholder, formalising decisions (minutes or written manager's resolution) creates evidence that the company assessed the transaction.
- Register of related-party transactions (date, counterparty, amount, approval, link to contract).
- Abstention of the interested shareholder from the resolution when other shareholders or directors decide.
- Annual review of the related-party list and expiring contracts.
- Clear separation between the shareholder's private account and the company account: no «mixed» payments without supporting documentation.
Accounting trail for auditors and the FTA
Ordinary accounting must allow every flow to or from related parties to be reconstructed. Companies applying Swiss GAAP FER must disclose significant related-party transactions in the notes (RPC/FER 15); SMEs subject to audit also benefit from dedicated analytical accounts.
Chart of accounts: sub-accounts for receivables/payables to shareholders (e.g. accounts 1190/2190), related-party rent, intragroup fees. Avoid hiding balances in generic «other receivables» accounts.
Entries: each related invoice with a clear counterpart, correct VAT, cost centre or project where useful to the auditor. Accruals and matching must follow the contract (rent paid in advance, quarterly fee).
Digital attachments: contract, resolution, pricing note and invoice in the same «dossier» as the entry. With Accountex, attaching PDFs to transactions reduces sampling time in audit.
Year-end close: reconcile intragroup balances, check open items older than 12 months, prepare a list of significant transactions for the notes and the tax questionnaire.
What the FTA and auditor ask for
Tax perspective
The FTA and cantonal authorities check whether expenses are deductible and whether undeclared benefits increase the taxable profit of the company or the shareholder. Excessive loans, favourable rents and inflated services are common cases. Arm's length documentation is the first line of defence; in its absence, the authority's estimates apply.
Audit perspective
The auditor samples related transactions, verifies that contracts exist, disclosures are complete and there are no material misstatements. Opting out does not remove the obligation to keep proper records: registers and supporting documents remain mandatory for ten years (Art. 958f CO).
Annual operational checklist
Update the related-party list (shareholders, family members, controlled and affiliated companies).
Check contract expiry dates and renewals with an arm's length price review.
Reconcile receivables/payables to shareholders and intragroup; close obsolete items with a resolution.
Sample related invoices: contract, price, VAT and accounting entry aligned.
Prepare disclosure notes and dossiers for trustee/auditor before year-end close.
Documentary order as an investment
Related-party transactions are not prohibited: they are normal in Swiss business structures. Risk arises when contract, credible pricing and an accounting trail are missing. Formalising today reduces friction with the auditor, tax adjustment costs and tension between shareholders.
Centralising master data, attachments and dedicated sub-accounts in a single accounting workflow — as Accountex allows — turns compliance from a year-end emergency into a manageable routine during the financial year.