Global Reframing Tax Survey 2025
PwC research reveals the critical role of tax in business strategy and highlights potential actions for realising its full potential.
Dominik Birrer
Partner Tax, PwC Switzerland
Armin Marti
Tax Policy Switzerland, PwC Switzerland
Rolf Röllin
Director - Corporate Tax, PwC Switzerland
On 17 August 2022, the Swiss Federal Council launched the public consultation with respect to the ordinance laying out the material aspects of the Pillar 2 implementation in Switzerland. Interested parties have time until 17 November 2022 to address comments to the Swiss administration. This blog post summarizes the main aspects and provides additional considerations regarding the draft ordinance.
A. Executive summary
- The draft Federal ordinance will govern the main aspects of the Pillar 2 implementation in Swit-zerland during a transition phase from 1 January 2024. As anticipated, it foresees an OECD-compliant introduction of the GloBE Rules, namely an introduction of a Swiss Top-up Tax in the form of a Qualified Domestic Minimum Top-up Tax (QDMTT), an International Top-up Tax in the form of an Income Inclusion Rule (IIR) and an Undertaxed Payments Rule (UTPR).
- The draft ordinance includes a direct reference to the GloBE Model Rules including the respec-tive Commentary and the Implementation Framework to follow. In addition, certain Swiss-specific regulations have been added that e.g. deal with the allocation of the Top-up Tax amount to a group’s various Swiss companies / branches (also if they are located in different cantons).
- Since the current draft is subject to public input (to be addressed until 17 November 2022), the ordinance can still be amended.
- The draft ordinance is the first of two anticipated parts of the ordinance to be published by the Swiss Federal Council. The second ordinance, which is expected to be more detailed than the first one, will deal with procedural elements. The latter entails aspects such as which canton will levy the Top-up Tax, which entity will be required to pay the Top-up Tax, supervision by the Swiss Federal Tax Authorities, etc.
- The default date for the draft ordinance to come into effect is 1 January 2024. However, the or-dinance provides the Swiss Federal Council the discretion to postpone such implementation date should there be delays in the implementation internationally.
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B. Further considerations
- Overall, the Swiss approach of tackling the Pillar 2-related implementation challenges is to ensure an alignment with the Model Rules and related Commentary. This allows taxpayers certainty that the Swiss rules are OECD-compliant and should thus be internationally accepted.
- The Swiss QDMTT applies for Swiss tax resident companies and branches if the Ultimate Parent Entity (UPE) records an annual turnover of at least EUR 750m. However, if the jurisdiction of a foreign UPE foresees a lower threshold for Pillar 2 to apply, such lower threshold with respect to the Swiss QDMTT would also be applicable in Switzerland to Swiss entities ultimately owned by such foreign UPE.
- If a group has Swiss tax resident companies / branches in various cantons, the proceeds from the QDMTT are allocated among them following the causality principle. In other words, the QDMTT is allocated to the extent a particular company/ branch has “contributed” to the Top-up Tax.
- The IIR applies for non-Swiss tax resident companies and branches if the latter’s shareholder / head office is the Swiss UPE or a Swiss Intermediate Parent Entity (IPE) provided its foreign UPE records an annual turnover of at least EUR 750m. The IIR will be allocated to the respective Swiss UPE / IPE in conformity with the GloBE Rules.
- Switzerland will apply the UTPR for groups with low-taxed subsidiaries / branches if such group has a Swiss tax resident company or branch and provided the low-taxed income is not subject to an IIR. If a group has multiple Swiss tax resident companies / branches, the UTPR is getting allocated among them using the allocation methodology as per the GloBE Rules in analogy.
- Switzerland plans to allow companies to be exempt from the UTPR for max. 5 years during their initial phase of international activity (as foreseen and defined in the GloBE Model Rules). However, this exemption shall not apply if Switzerland would be qualified as the so-called Reference Jurisdiction, i.e. if the Swiss tax resident companies / branches – compared to other jurisdictions in which the group operates – on an aggregated basis have the highest value of tangible assets for the fiscal year in which the group originally comes within the scope of the GloBE Rules.
- All GloBE Rules – including the UTPR – shall be implemented from 1 January 2024. As such, no delay is expected between the implementation of the QDMTT / IIR and the UTPR.
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