• Olivier Eichenberger, Director |

Switzerland moves on with the process of implementing the global minimum tax: after proposing a change in the constitution to the Parliament, the Federal Council published the draft of the implementation ordinance for consultation.


As already communicated in January 2022, Switzerland intends to implement the global minimum taxation (Pillar 2) agreed by the OECD/G20 Inclusive Framework with an amendment of the constitution including temporary arrangements with basic parameters which will empower the Government to release the respective (temporary) implementation ordinances as of January 2024. 

In a later step, such ordinances  shall be replaced by an amendment of the formal law. 

The OECD initially foresaw the implementation date for 2023 (Income Inclusion Rule) and 2024 (Undertaxed Payment Rule). However, there is a delay of approximately one year, with only a few countries still targeting a (partial) implementation already for 2023. Hence, Switzerland does not seem to be late with its targeted implementation timeline. 

Current Status

After a consultation procedure, on 23 June 2022 the Federal Council released the dispatch including the draft of the constitutional amendment to the Parliament. It is now in the hands of the chambers of the Parliament to decide on this constitutional amendment. In advance, the advisory commissions of both chambers are preparing the parliamentary procedures. On 26 August 2022, one of the commissions has already supported the Government's proposal. The constitutional amendment will be subject to a mandatory public referendum which is scheduled for June 2023. 

The actual implementation, however, is to be executed by the Federal Council by means of an ordinance. One ordinance governing the technical details had been published in a draft version for consultation on 17 August 2022. There will be another ordinance governing the relevant procedures, which is to be published as a draft later in the year, once more guidance by the OECD in this regard becomes available. 

The available draft ordinance foresees the implementation of: 

  • (Qualified) Domestic top-up tax (schweizerische Ergänzungssteuer)
  • Income Inclusion Rule (IIR)
  • Undertaxed Payment Rule (UTPR) – without exclusion in the initial phase according to article 9.3 of the model rules 

It thereby mainly refers to the OECD pillar 2 model rules for the determination of the respective top-up tax. Furthermore, it states that the model rules are to be interpreted in accordance with the respective OECD commentary to the model rules. This ensures best that the Swiss implementation is in line with the OECD rules and internationally accepted. In conformity with the model rules, Switzerland for instance also adopts the de minimis exclusion.

Which companies are affected?

The Swiss domestic top-up tax is applicable to Swiss constituent entities of international groups with a consolidated turnover of at least EUR 750 million. However, if the country of the ultimate parent of such group applies a lower threshold (for the IIR), then also the Swiss domestic top-up tax is applicable for such Swiss constituent entities. Apart from that, the Swiss domestic top-up tax shall not be conditional on other factors such as the tax residence of the ultimate parent or whether other jurisdictions would apply a top-up tax.

What happens next?

The consultation procedure on the draft ordinance runs until 17 November 2022. Furthermore, the parliament is expected to decide on the constitutional amendment by December 2022. If the public referendum in June 2023 confirms the amendment, the Federal Council currently intends to implement the minimum taxation as per 1 January 2024. However, in case the implementation of the global minimum tax would be (further) delayed in other countries (in particular in the EU and the UK), the Federal Council may decide to implement the minimum taxation only at a later point in time. Accordingly, the timing is somewhat flexible to take into account international developments.

What should companies do now?

The question is not if, but by when the minimum taxation will be implemented. Accordingly, companies should analyze to which extent they are affected by the minimum taxation and how they could fulfill the new reporting and compliance requirements. In this regard, many companies have started projects with a particular focus on the required data and its availability (data mapping). 

Moreover, companies should be aware that investors may expect to see disclosures about the potential impacts before the changes to local tax laws are finalized. Therefore, if companies expect the global minimum taxation to significantly affect them and that this information is relevant to the users of their financial statements, then they should consider providing disclosures in both their 2022 interim and annual reports (the appropriate level of disclosures would need to be determined). Further information in this regard can be found here

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