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May 25, 2023

Switzerland opens public consultation on procedural aspects of the OECD's Pillar Two minimum corporate tax

  • The Swiss Federal Council has opened the second public consultation on the transitional ordinance that will regulate the OECD's Pillar Two minimum corporate tax in Switzerland during a transition phase, with new provisions added mainly on procedural and criminal tax law aspects.
  • The public consultation runs until 14 September 2023 and the ordinance is intended to apply from 1 January 2024.
  • This Alert outlines the key provisions of the updated draft ordinance and the most important information included in commentary on the ordinance, as well as the results of the first public consultation on the draft ordinance, which were published concurrently.

Executive summary

On 24 May 2023, the Swiss Federal Council opened the second public consultation of the ordinance that will temporarily regulate the OECD Pillar Two minimum corporate tax in Switzerland during a transition phase. The new part of the ordinance includes the tax obligation (one-stop shop), the joint liability of the Swiss constituent entities (CEs) as well as procedural and criminal tax law aspects.

The commentary on the ordinance confirms the application of transitional Country-by-Country Reporting (CbCR) safe harbor rules as well as the deferred introduction of the Undertaxed Profits Rule (UTPR) in Switzerland as of 1 January 2025 at the earliest, in line with the European Union.

All interested parties can comment on the proposed ordinance until 14 September 2023. The ordinance is intended to apply from 1 January 2024.

General implementation of Pillar Two in Switzerland

Pillar Two of the OECD Base Erosion and Profit Shifting (BEPS) 2.0 Project shall be implemented in Switzerland by way of a constitutional amendment, an ordinance for a transition period and subsequently a permanent tax bill. The constitutional amendment provides the legal basis for introducing Pillar Two. The constitutional amendment is subject to a public vote that is scheduled for 18 June 2023.

The first draft of the ordinance with the technical part was published on 17 August 2022,1 with a public consultation that was open until 17 November 2022. That part of the ordinance covered the technical aspects of the introduction of the new Swiss taxes, including the Income Inclusion Rule (IIR), Qualified Domestic Minimum Top-up Tax (QDMTT), and UTPR. On 24 May 2023, the Swiss Federal Council published the comments received as part of this public consultation on the technical part of the ordinance. Most of the comments have not yet been reflected in the second version of the draft ordinance.

Detailed discussion

Swiss QDMTT in general and its interaction with CFC/GILTI rules

The Organisation for Economic Co-operation and Development's (OECD's) Agreed Administrative Guidance offers certain elections that jurisdictions can take in the design of their QDMTT. Switzerland foresees the following choices (all in the favor of the affected Swiss businesses):

  • Switzerland decided against the possibility of only allowing a domestic accounting standard for the QDMTT (i.e., Switzerland offers full flexibility and all accounting standards allowed by the GloBE Model Rules are also allowed for the Swiss QDMTT). This reduces the administrative burden on the affected companies.
  • The Swiss government waives the possibility of precluding the application of the substance-based carveout for the QDMTT calculation. Therefore, it is possible to reduce the Swiss QDMTT tax burden with a substance-based carveout.
  • Switzerland plans to take the option regarding the deductibility of fines. In line with the rules for the IIR and the UTPR, fines up to EUR 50,000 can be deducted from the Swiss QDMTT. Fines exceeding EUR 50,000 are not deductible in their entirety.

The commentary on the Swiss ordinance notes that controlled foreign company (CFC) and global intangible low-taxed income (GILTI) taxes are not considered when calculating the QDMTT according to the OECD guidance (contrary to the rules applying to the IIR and UTPR, which consider CFC/GILTI taxes and thereby reduce the eventual top-up tax amount).

Entry into force

The Federal Council expects the ordinance to enter into force as of 1 January 2024. However, the commentary explicitly mentions, for the first time, that introduction of the UTPR in Switzerland will be deferred, commencing as of 1 January 2025 at the earliest, in line with the European Union.

Transitional CbCR safe harbors

According to the commentary on the Swiss ordinance, documents published by the OECD/G20 must be taken into account in interpreting and applying the GloBE Model Rules in Switzerland. The application of transitional CbCR safe harbors2 is explicitly mentioned as an example. Neither the ordinance nor the commentary includes any additional Swiss-specific guidance. No deviations from the GloBE Model Rules are therefore expected regarding the transitional CbCR safe harbors.

Tax obligation (one-stop shop)

Switzerland applies a so-called "one-stop shop" concept where only one of the Swiss CEs of an in-scope MNE is subject to the Pillar Two tax (QDMTT, IIR or UTPR) in Switzerland. The respective CE's canton of residence is responsible for the entire group's Pillar Two tax assessment in Switzerland. It allocates the Swiss top-up tax revenue between the cantons and the Federation.

The Swiss CE that is subject to the IIR based on the GloBE Model Rules is also responsible for the QDMTT and UTPR in Switzerland. This is always an Ultimate Parent Entity (UPE) or an intermediate parent entity. If there is no UPE and there are no intermediate parent entities in Switzerland, or if there are multiple intermediate parent entities at the same level, the most-economically important CE is subject to tax.

Despite the one-stop shop approach there is joint liability for all Swiss CEs with respect to the payment of the Pillar Two taxes.

Deductibility of the Pillar Two taxes as business expenses from CIT

Contrary to other Swiss taxes, the Pillar Two taxes are not deductible for corporate income tax (CIT) purposes in Switzerland.

Declaration and assessment procedure

The Pillar Two taxes are assessed in a mixed assessment procedure analogous to the assessment procedures for CIT and net equity tax in Switzerland (i.e., with the company submitting a self-declaration and the competent cantonal tax authority assessing the tax factors and setting the tax amount). The self-declaration of the taxable CE, as well as the assessment and requests from the tax authorities, are conducted over an electronic portal.

The Swiss CE subject to tax must file the Swiss Pillar Two tax return — in equivalence with the GloBE information Return — 15 months after the end of the respective fiscal year. For a CE's first Swiss Pillar Two tax return, the filing deadline ends 18 months after the end of the respective fiscal year. The Pillar Two taxes become due at the same time.

Elections based on the GloBE Model Rules must be made and submitted alongside the Swiss Pillar Two tax return.

Appeals procedure

The first appeal must be made to the competent cantonal tax authority, as it is the case for existing CIT. After that, the Pillar Two tax appeals procedure differs from the existing CIT appeals procedure. An appeal from the cantonal tax authorities' decision must be taken to the Swiss Federal Administrative Court with the option to further appeal to the Swiss Federal Supreme Court.

Criminal tax law

Criminal tax laws applicable to Pillar Two taxes track the existing criminal tax law provisions for Federal CIT. Accordingly, the same offenses lead to the same penalties. The only difference is the appeals procedure, as described above.

For fiscal years starting before 31 December 2026 and ending before 30 June 2028, penalty relief under OECD guidance applies. Hence, negligent violations of procedural obligations and negligent tax evasion will not lead to any penalties during this period.

Results of the first public consultation on the draft temporary ordinance

The first public consultation that covered the technical aspects ended on 17 November 2022. The consultation report was released with the start of the second public consultation on 24 May 2023; however, most of the comments have not yet been incorporated into the second draft version of the ordinance.


All interested parties may comment on the proposed draft ordinance until 14 September 2023. The Swiss Federal Council is expected to release the final version of the ordinance later in 2023 after considering the comments received as part of this second public consultation. The final version may deviate from the draft ordinance, considering that comments made during the consultation procedure as well as any further developments in the Pillar Two project could effect changes.

The constitutional amendment, subject to a public vote on 18 June 2023, would provide the legal basis for introducing Pillar Two into Swiss domestic law. According to the constitutional amendment, the Swiss Federal Council may implement Pillar Two as of 1 January 2024. However, the Swiss Federal Council has full flexibility and could also abort or postpone the implementation of Pillar Two in Switzerland if the international consensus on the global minimum tax project eroded in the meantime.

Before the ordinance is formally issued, the Swiss Federal Council will analyze the status of implementation in other jurisdictions, namely the European Union, to ensure a simultaneous entry into force. The ordinance's entry into force is currently expected for 1 January 2024.

The UTPR will not be introduced in Switzerland until at least 1 January 2025, and if implementation in other jurisdictions is further delayed, the Swiss Federal Council will revisit and, if necessary, adjust the entry into force for the UTPR.

It has already been agreed that 25% of the additional tax revenue will be allocated to the Federation and the remaining 75% will be designated for the cantons.3 This enables the cantons to further invest in the attractiveness as a business location.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Ltd, Zurich

Daniel Gentsch |

Thomas Semadeni |

Alain Horat |

Ernst & Young Ltd, Geneva

Ioseb Nutsubidze |

Sarah Drye |

Ernst & Young LLP (United States), Swiss Tax Desk, New York

Stefan Ruest |

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor



1 See EY Global Tax Alert, Switzerland opens public consultation on material aspects of the OECD's Pillar Two minimum corporate tax, dated 18 August 2022.

2 See EY Global Tax Alert, OECD/G20 Inclusive Framework releases document on safe harbors and penalty relief under Pillar Two GloBE rules, dated 21 December 2022.

3 See EY Global Tax Alert, Swiss Parliament approves domestic BEPS 2.0 Pillar Two implementation | Constitutional amendment now subject to public vote, dated 16 December 2022.


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