In the popular vote on 18 June 2023, Swiss voters approved the most extensive change to the Swiss corporate tax system in over a century with a wide majority. With the amendment of the Swiss constitution the Swiss voters have paved the way for the Swiss legislator to introduce the global minimum tax (also referred to as “Pillar II”) in Switzerland.

Pillar II introduces an additional layer of taxation (tax law) to Swiss constituent entities of multinational enterprises in scope of the rules and introduces a corporate group taxation system in Switzerland with a mandatory tax of 15% that is determined under a new tax basis (“GloBE”).

The magnitude of change is significant and will redefine the Swiss corporate tax environment in the years to come.

Global Minimum Tax?
The vote greenlights the implementation of the GloBE Rules in Switzerland, a set of international tax rules designed to enforce a minimum floor of taxation of 15% with regard to MNE Groups in scope, i.e. large multinational enterprises with consolidated revenues above EUR 750 m per year and cross-border operations (through subsidiaries or permanent establishments – “Constituent Entities”).

GloBE Rules incorporate a harmonized determination of a tax base (“GloBE Income”) and definition of covered taxes (“Adjusted Covered Taxes”) to test the 15% minimum floor of taxation per jurisdiction. The GloBE Rules allow for three mechanisms to guarantee this minimum level of taxation is adhered to, a domestic top-up tax regime (“QDMTT”), income inclusion rules (“IIR”) and undertaxed profit rules (“UTPR”).

The road to the implementation of the Global Minimum Tax in Switzerland
The approved amendment to the Swiss constitution does not contain an enforceable implementation law but paves the way to transpose the Global Minimum Tax into legally enforceable Swiss domestic federal law as of 1 January 2024.

Hence, the Swiss Federal Council is vested with the ability to enact and implement the reform by way of an ordinance with effect as of 1 January 2024. Considering the consultation period of the respective ordinance runs until 24 September 2023, we would not expect the Swiss Global Minimum Tax to be substantially enacted before 30 September 2023 and disclosure requirements under IFRS or US GAAP will likely be triggered in Q4/2023 only. Note that the reach of enacted GloBE Rules in other jurisdictions may trigger earlier disclosure requirements!

According to the intention of the Swiss Federal Council, the rules to enforce the Global Minimum Tax in Switzerland are to be implemented as following:

• The Swiss domestic minimum tax regime (Swiss “QDMTT”) will apply to all Swiss constituent entities of an MNE Group in scope with regard to business years starting on or after 1 January 2024 and FY2024 could be the first year.
• The Swiss Income Inclusion Rules (Swiss “IIR”) will apply to all foreign subsidiaries of a Swiss resident ultimate parent entity, qualifying intermediary holding company or a Swiss partially owned parent entity with regard to business years starting on or after 1 January 2024.
• Depending on the global discussion with regard to the UTPR-Rules, the Swiss Federal Council is expected to implement the UTPR only in 2025.
• The Swiss Federal Parliament will need to draft final legislation to implement the Global Minimal Tax within 6 years in a federal law.

How will the implementation law look like?
The draft Swiss ordinance is “short” compared to the GloBE Rules. The limited content is owed to a direct reference to the GloBE Rules, the GloBE Commentary and the Administrative Guidance for the interpretation of both the Swiss QDMTT and the IIR (respectively the UTPR, should it be introduced) and the application of the GloBE Safe Harbour.

As a consequence the implementation in Switzerland is expected to be fully aligned with the OECD GloBE Rules and no deviations are expected for the time being. The further elements of the consultation draft of the ordinance deal with “administrative” guidance and the “introduction” of a “one-stop-shop” concept for MNE in scope of the rules, meaning:

• Irrespective of the number of Constituent Entities in Switzerland and their geographical location, only one Constituent Entity will be subject to the Swiss QDMTT and the IIR, the Constituent Entity subject to QDMTT and IIR will be liable for the respective taxes on behalf of all entities in scope. Hence, only one canton will be in charge to assess the QDMTT and IIR or UTPR of all Swiss Constituent Entities:
            o The canton in charge is either the canton of residence of the ultimate
               parent entity; or
            o The canton of residence of the most important Swiss Constituent Entity,
               derived from:
                  - Highest average profit (excluding net-participation-income) of the last three
                     years.
                  - Highest average equity in case no entity had a taxable profit.
  
  

• In order to organize the “one-stop-shop”, the cantonal tax administrations will introduce a new electronic information system and MNE Groups in scope of the GloBE Rules will need to register with the Swiss Federal Tax Administration within the filing deadline and all filings will be electronic.
  
  
• The Swiss QDMTT Regime will be aligned with the GloBE Rules and the Swiss Federal Council intends to not opt for deviation towards the GloBE Rules for the time being.
  
  
• There will be three assessments issued to an MNE Group in scope:
          o One Assessment with regard to the top-up taxes under Swiss QDMTT
          o One Assessment with regard to the top-up taxes under IIR
          o One Assessment with regard to the top-up taxes under UTPR
  
• All administrative procedures and appeals with regard to the top-up taxes could be guided towards the Swiss Federal Administrative Court in St. Gallen directly and subsequently to the Swiss Supreme Court (i.e. no cantonal courts will be involved in the appeal procedures and it would be possible that no appeal procedure is required at cantonal level). In addition to the taxpayer, the cantonal authority and the Swiss Federal Tax Administration will be able to appeal.
  
  
• Failing to comply with the obligations would result in penalties:
          o Of CHF 1’000 respectively up to CHF 10’000 for failing to comply with the filing obligations.
          o Of a penalty between 1/3 up to three times of the top-up taxes due in case the assessment of top-up taxes was hindered by the taxpayer.
          o In case of negligent failures, the penalties could be waived or reduced for tax periods up to and including FY2026.

Swiss Tax Reform with Global Impact
Today’s vote of the Swiss people provides legal certainty that the most impactful Swiss tax reform of the last decade is moving forward. With this vote of commitment, the Swiss follow the European Union’s intention to progress the Global Minimum Tax.

This change presents the most significant change to the global tax environment and legal certainty ahead of taking effect in 2024 is welcome.

Time to navigate the Global Minimum Tax
There is no doubt that the Global Minimum Tax presents a significant new administrative burden to multinationals in scope. Considering the limited timeframe to the implementation and the reach and effect of transition rules, tax departments need to prepare for the additional compliance and reporting obligations.

If you have any questions, please do not hesitate to contact us.

Key contacts

Daniel Stutzmann - Partner, Global Minimum Tax  

Daniel is a tax partner with 17 years of experience as an international corporate tax specialist. He has extensive experience in the area of cross-border structuring (including establishing tax-efficient IP and financing structures) and business reorganisations, including large supply chain transformation projects. Daniel also has broad knowledge in tax accounting and tax reporting, both from an advisory and audit side. He is a specialist in the OECD pillar two legislation and its impact, and leads the Deloitte Switzerland pillar two team.

As a Swiss tax expert, Daniel has managed the Swiss tax compliance of hundreds of companies in Switzerland, from various industries. He is well acquainted with the Swiss tax authorities and has successfully led various tax audit and tax ruling negotiations with the Swiss tax authorities.

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Ilan Rom - Partner, Financial Services Tax & Legal

heads Deloitte’s Insurance Financial Services Tax practice in Switzerland and is a Tax Partner with 20 years of experience as a corporate tax specialist. Prior to joining Deloitte, Ilan served as tax director of one of Switzerland largest companies in this sector. Ilan has a wealth of experience in the insurance and re-insurance industries and is a tax expert with deep knowledge in the area of Insurance/ Reinsurance, Treasury, Asset Management, Corporate Restructuring, M&A, VAT, Transfer Pricing and Tax Reporting.

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Brandi Caruso - Partner, Tax Accounting

Brandi heads Deloitte’s Tax Accounting team in Switzerland. She is responsible for clients across a range of industries with significant operations globally, including teams, project deliverables, related proposals, and overall stakeholder management. Brandi is the Lead Tax Audit Partner for both Swiss and globally led audit engagements. Brandi has extensive expertise in advising the Swiss financial services industry on the implementation of US and international transparency regimes. Brandi is a US Certified Public Accountant and has more than 20 years of experience with Deloitte and has worked in London and San Diego.

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Ferdinando Mercuri - Partner, Corporate Tax

Ferdinando has over 22 years of professional experience in providing tax advice to Swiss and international individuals and businesses. Ferdinando advises individuals on wealth and estate planning, and entrepreneurs operating independently or via companies and legal entities on restructuring, mergers, acquisitions, and Swiss and international tax planning. In recent years, he has had a particular focus on consulting in relation to shareholding plans for private equity and major acquisitions and sales of companies and, more generally, on providing comprehensive tax advice to Swiss and international companies. He teaches tax law in French-speaking Switzerland, is responsible for the international tax module at Swiss Expert and is an expert in tax examinations. He regularly hosts conferences on topical tax issues (notably at the Ordre Romand des Experts fiscaux (Order of certified tax experts of Western Switzerland) and the Tax Law Day in Geneva).

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Jacques Kistler - Partner, International Tax

Jacques is the Lead Partner of our Corporate Tax service line in the French Speaking part of Switzerland, covering international tax and M&A. He has been a full time International Corporate Tax specialist for over 30 years.

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Manuel Angehrn - Senior Manager, Global Minimum Tax  

Manuel is a Senior Manager with over 10 years of experience in International Tax. He is a Deloitte Switzerland’s Global Minimum Tax subject matter expert. He follows domestic and global tax developments and assesses the impact to Swiss multinationals.

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Ryan Peluso - Manager, Global Minimum Tax

Ryan is a Manager with over 7 years of experience in International Tax. He supports in modelling the impact of Pillar II as well as developing and executing processes for its implementation. He is specialised in helping clients access, visualise and analyse their data for international tax reporting, compliance and planning processes.

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