Sign up for tax alert emails GTNU homepage Tax newsroom Email document Print document Download document | ||||||
December 28, 2023 Swiss BEPS 2.0 Pillar Two implementation – Switzerland to apply QDMTT beginning 1 January 2024; IIR and UTPR delayed
On 22 December 2023, the Swiss Federal Council officially declared the entry into force of the Swiss implementation of the Organisation for Economic Co-operation and Development's (OECD) Base Erosion and Profit Shifting (BEPS) 2.0 Project's Pillar Two rules beginning 1 January 2024 (Introduction of OECD/G20 minimum tax rate with effect from 1 January 2024 (admin.ch)). However, only the Qualified Domestic Minimum Top-up Tax (QDMTT) will apply from 1 January 2024 onward. The application of the Income Inclusion Rule (IIR) and Undertaxed Payments Rule (UTPR) has been delayed and will be revisited at a later point in time. According to the explanatory statement released with the Pillar Two ordinance, the IIR and UTPR are likely to be introduced on 1 January 2025. This decisive step is a testament to Switzerland's commitment to complying with international tax standards while remaining an attractive business location. Pillar Two of the BEPS 2.0 project, which stipulates a 15% global minimum tax for multinational enterprises with an annual turnover exceeding €750m, is set to reshape the tax framework. The initiative is designed to combat base erosion and profit-shifting actions by large multinational corporations, establishing a more balanced and fair global tax environment. With the delay of the IIR and UTPR, Switzerland has reached an attractive compromise, with undertaxed income from non-implementing jurisdictions escaping taxation in 2024. Switzerland's compromise approach could present a competitive advantage in comparison with jurisdictions who fully implemented the Pillar Two rules. It could however lead to additional complexity in determining those entities subject to either QDMTT or IIR in any given jurisdiction during 2024. The impact for each group will however depend on the specific group structure, and it is therefore essential for businesses to fully analyze the nuances of the law before evaluating the potential impacts on their tax liabilities and obligations. In parallel, the Swiss Federal Council has also unveiled the final version of its Pillar Two ordinance (the final ordinance and the respective explanatory statement can be found under the following links as a pdf in German and French Verordnung (admin.ch); Ordonnance (admin.ch) | Erläuterungen (admin.ch); Commentaire (admin.ch)). There are no substantial deviations from the draft ordinance, which was earlier subject to consultation. However, there were a few changes and clarifications on the following items:
Otherwise, the key items of the ordinance can still be summarized as follows:
The Federal Council has full flexibility to update and improve the Pillar Two ordinance if it is in the interest of Switzerland or if unexpected issues arise during its application. In that case, a simple Federal Council decision is sufficient without any binding input from Parliament. This is also true regarding a later application of the IIR and UTPR. The Swiss Federal Council must now propose a draft law on Pillar Two to the Swiss Parliament within six years. Stay connected for more information as we further analyze this new ordinance for its potential implications on businesses operating in Switzerland.
| ||||||