Background: OECD Pillar 2
The OECD/G20 initiative to combat base erosion and profit shifting provides for a global minimum tax of 15% for multinational corporate groups with consolidated revenues of more than EUR 750 million under Pillar 2. Over 140 countries have committed to implementing this.
In Switzerland, the minimum tax ordinance came into force on January 1, 2024. Domestic business units of affected multinational groups are subject to a Swiss top-up tax. This also includes Swiss subsidiaries and permanent establishments of foreign groups in Switzerland.
Implementation in Switzerland: National and international top-up tax
In its resolution dated December 22, 2023, the Federal Council introduced a Swiss local Top-up Tax (QDMTT) as of January 1, 2024. The minimum tax rate is currently 15% on pre-tax profits, which are determined on the basis of the OECD model rules in line with international accounting standards. The recognised accounting standard used for the ultimate parent company’s consolidated financial statements is generally decisive. Alternatively, Swiss GAAP FER can be used as a basis for the Swiss top-up tax.
The Federal Council also decided to introduce an international top-up tax (IIR) as of January 1, 2025. This will ensure minimum tax rate at the level of the ultimate parent company (or an intermediate holding company) in Switzerland if the subsidiaries in other countries are not subject to a domestic minimum taxation.
The introduction of a subordinated top-up tax (UTPR) has not yet been implemented in Switzerland.
Relief in the initial phase: Transitional safe harbour rules
In order to reduce the complex documentation requirements for multinational groups in the initial phase, the OECD is providing temporary relief for the first three financial years (i.e., until 2026).
The so-called transitional safe harbors consist of three tests, most of which are based on data from a qualified country-by-country report (CbC report). If a test is passed, the Swiss top-up tax for the relevant year is nil. Also, certain declaration simplifications may apply.
- De minimis test: Turnover below EUR 10 million & pre-tax profit below EUR 1 million (based on a qualified CbC report, taking certain adjustments into account)
- Simplified ETR test: Simplified covered taxes in relation to pre-tax profit according to the qualified CbC report result in an effective tax burden of at least 15% (for 2024, 16% for 2025, 17% for 2026).
- Routine profit test: Profit or loss before income tax according to the qualified CbC report is equal to or less than the substance-based allowance according to the GloBE model rules.
Deadlines and registration requirement
Affected companies in Switzerland must submit their first tax return for the domestic and/or international top-up tax within 18 months of the end of the financial year (June 30, 2026). For subsequent years, the filing deadline is reduced to 15 months. Registration and declaration are carried out electronically via the OMTax portal.
Rely on our expertise
We are happy to assist you with the processing of the OECD minimum taxation and the Swiss top-up tax. Please contact us to determine the necessary steps:
- Clarification of the application case: Identification of affected multinational groups, family offices, and foundations
- Identification of scope: Determination of relevant business units and constituent entities
- Review of transitional provisions: clarification of the applicability of safe harbor rules
- Calculation of relevant GloBE profits and covered GloBE taxes
- Determination of GloBE ETR and applicable top-up tax
- Registration and declaration
Flyer on the topic
Your contacts at Avanta
Sabina Paltarzhytskaya
Tax
|
Zurich
Eliane Horat
Tax
|
Zug
