Switzerland: Implementation of Pillar Two global minimum tax

How Pillar Two (global minimum taxation of 15%) agreed by the OECD and G20 member states is to be implemented in Switzerland

How Pillar Two (global minimum taxation of 15%) is to be implemented in Switzerland

The Swiss Federal Council on 13 January 2022 communicated how Pillar Two (global minimum taxation of 15%) agreed by the OECD and G20 member states is to be implemented in Switzerland. The main points are summarized below. In general, it is expected that the Swiss public will vote on a constitutional amendment in June 2023, providing the basis for an implementation beginning in 2024.

Read TaxNewsFlash for background on Pillar Two

How will the minimum taxation be implemented?

  • Only multinational groups with an annual turnover of at least €750 million are in scope, while nothing will change for purely domestically focused companies and small and mid-size enterprises (SMEs).
  • The minimum taxation will target groups headquartered in Switzerland (approx. 200-300 entities) as well as Swiss subsidiaries of foreign groups (approx. 2,000 entities).
  • Any additional taxes will be collected by the cantons, which may dispose of such additional tax revenues.

Will Switzerland’s implementation be in line with the OECD’s timetable?

  • According to the OECD, the primary Income Inclusion Rule will be implemented as from 2023.
  • However, considering local legislative steps required and since the OECD's technical specifications will not be available until later in 2022, Switzerland intends to implement as from 2024.
  • Nevertheless, the Swiss implementation will be ready when the secondary Undertaxed Payment Rule may be implemented by the countries, which is important for groups headquartered in Switzerland to spare them additional tax proceedings abroad.

Which legislative process is intended?

  • Amendment of the constitution including temporary arrangements with basic parameters by means of a public vote in 2023
  • Temporary ordinance by the Federal Council to ensure that the minimum tax rate comes into force on 1 January 2024
  • Subsequent amendment of legal basis through ordinary legislative process without time pressure through which the temporary ordinance will be replaced

Why is a constitutional amendment necessary?

  • To lay the groundwork for an implementation by (temporary) ordinance of the Federal Council (which provides legal certainty and is faster than an implementation by amending legislation)
  • To lay the foundations for a differing treatment of smaller and larger businesses

Read a January 2022 report prepared by the KPMG member firm in Switzerland

 

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