At the beginning of 2024, Switzerland introduced a domestic minimum top-up tax for companies. This initiative has since been expanded with the implementation of an international supplementary tax under the Income Inclusion Rule (IIR). The Swiss Federal Council also introduced measures to address unpaid debts to public authorities, regulate data transfers to certified U.S. companies, and stricter requirements for board reappointments. Each update is expected to impact Swiss companies going into 2025—in this blog, we explore how.
What’s the Income Inclusion Rule?
On September 4, 2024, the Federal Council decided that the IIR would go into effect on January 1, 2025. This measure aims to ensure that companies operating in Switzerland, as well as their foreign business units, are subject to minimum taxation. If a foreign business unit is not adequately taxed in another jurisdiction, the ultimate parent entity or intermediate holding company will be responsible for meeting the tax requirements. This policy helps retain tax revenues within Switzerland while providing legal clarity for businesses.
The Canton of Zug was among the first to propose strategic measures to allocate the additional revenue from the domestic top-up tax. Other cantons, including Geneva, Grisons, and Schaffhausen, have also taken steps to enhance their attractiveness as business hubs, ensuring they remain competitive in the evolving tax landscape.
What’s the Swiss-U.S. Data Privacy Framework?
On August 14, 2024, the Federal Council added the United States to its list of countries that have an adequate level of data protection. This decision allows personal data to be transferred from Switzerland to U.S. companies certified under the established framework without requiring additional safeguards.
Certification ensures that the transferred data is protected and used only for its intended purpose. Transfers to non-certified companies are prohibited. In cases where U.S. authorities access the data, a redress mechanism is in place to address any concerns. For Swiss companies wishing to transfer data to non-certified U.S. entities, this remains possible if appropriate standard contractual clauses are established between the involved parties.
Geneva: New measures targeting unpaid debts and bankruptcy
The government of the Canton of Geneva has made it clear to the local business community that effective January 1, 2025, it will make use of changes in the debt and bankruptcy legislation to pursue non-payment of debts to public authorities more aggressively. This includes, for example, social security, taxes, and fines. The long-standing practice to pursue such unpaid debts by way of attachment is being abandoned for bankruptcy proceedings. This more aggressive stance is being taken to tackle unfair competition by slack payers. In case of attachment, company operation doesn’t have to stop, while bankruptcy effectively halts operations. Management of the company in question may be personally liable for (public) debts if the company is declared bankrupt.
Board reappointments: What are the consequences to Swiss corporate governance?
Swiss law mandates that board members must be reappointed within six months after the end of the financial year. For companies with a calendar-year financial cycle, this means reappointments must occur by June 30 of the following year. If this deadline is missed, the board members lose their positions.
In a recent landmark case, the Swiss Supreme Court ruled that former directors who have not been reappointed cannot convene shareholders’ meetings. Any decisions made by shareholders at such improperly convened meetings are deemed null and void. Similarly, resolutions passed by former directors after the six-month deadline are invalid.
This ruling challenges the previously held belief among legal practitioners that former directors retained limited authority to act in such circumstances. The decision underscores the importance of adhering to statutory deadlines for board reappointments to ensure corporate governance compliance.
How CSC can help you prepare for tax and data privacy measures
Don’t let regulatory changes catch your business off guard. CSC’s tailored Compliance solutions can help you navigate evolving regulations such as OECD Pillar 2, data privacy frameworks, and debt enforcement measures.
Contact us today to safeguard your business and ensure compliance.
