Switzerland to introduce IIR in 2025, but not UTPR - Tax and Legal blog

Tax_Insight_hero_black_hires_001

The Federal Council decided on 4 September 2024 that Switzerland will introduce the Income Inclusion Rule ("IIR") on 1 January 2025. The introduction of the Undertaxed Profit Rule ("UTPR") has been postponed until further notice.

Decision Federal Council

The Federal Council decided at its meeting on 4 September 2024 (media release: German/French/English) that Switzerland will bring the IIR into force with effect from 1 January 2025. This international top-up tax will complement the Swiss top-up tax (“QDMTT”) already introduced on 1 January 2024.

The Federal Council has also decided not to bring the UTPR into force for the time being, as it believes that the risks associated with such a move would outweigh the revenue potential of a UTPR. Moreover, the UTPR is subject to criticism from a legal standpoint. The Federal Council will continue to keep a very close eye on international developments with respect to the implementation of the OECD/G20 minimum tax rate.

Deloitte’s View

The Federal Council's decision had been expected following the discussions over the summer weeks but came now earlier than expected. This is to be welcomed, as it creates legal certainty at an early stage. The decision to introduce the QDMTT as early as 2024 was taken only a few days before the end of 2023, which led to a high degree of legal uncertainty for multinational groups. The decision to implement only the IIR for the time being is welcome. The UTPR has been criticized both nationally and internationally. In Belgium, for example, a US company has already filed a lawsuit against the UTPR.

Multinational groups headquartered in Switzerland with low-taxed (directly or indirectly held) subsidiaries and permanent establishments abroad will be subject to an international top-up tax on their profits in Switzerland from 1 January 2025. Specifically, US-based multinational groups with directly held holding companies in Switzerland and with low-taxed subsidiaries and permanent establishments abroad will also be subject to an international top-up tax in Switzerland. An intra-group sale of such participations from the Swiss holding company directly to the ultimate US parent company, for example, will no longer help to escape from top-up tax from 2025. Many EU member states will introduce the UTPR from 2025, which will tax the profits of such undertaxed subsidiaries.

Key contacts

Thomas Hug_blog2

Thomas Hug - Partner, National Tax Office

Thomas is the leader of Deloitte Switzerland's National Tax Office. He has a proven track record of being at the forefront of international tax developments and analysing their impact from a Swiss tax technical perspective. Thomas has published thought-leading articles and books, and is frequently asked by industry groups, universities and tax and accounting associations to make presentations or lead seminars. He serves as a substitute judge at the Zurich Tax Court of Appeal.

Email

Blog_Daniel stutzmann110x110

Daniel Stutzmann - Partner, Global Minimum Taxation

Daniel is a Tax Partner with 18 years of experience as an international corporate tax specialist. This includes a one-year assignment in the US to lead the Swiss ICE Desk of Deloitte. He is a specialist in the proposed OECD Pillar 2 legislation and its impact and leads the Deloitte Switzerland Pillar 2 team. In addition, he is co-leading the Deloitte Global Pillar 2 technical advisory group.

Daniel has extensive experience in the area of cross-border structuring (like establishing tax efficient IP- and financing structures) as well as business reorganizations including large supply chain transformation projects. This also includes advising several multinationals in moving their worldwide/regional headquarters or central functions to Switzerland.

As a Swiss tax expert he 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. He also has broad knowledge in tax accounting and tax reporting both from an advisory and audit side. Daniel leads the business tax practice in Switzerland.

Email

Manuel Angehrn110x110

Manuel Angehrn- Director, Global Minimum Taxation

Manuel is a Director 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.

Email

Comments

The comments to this entry are closed.