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Switzerland Implements OECD Pillar 2 Minimum Taxation, enacted January 1, 2024

Jurgen Borgt, managing director, Switzerland, provides an update on the OECD Pillar 2 Initiative, enacted in January 2024.

Last June, the Swiss public voted to allow the Swiss Federal Council to introduce transitional legislation to implement the Organisation for Economic Co-operation and Development’s (OECD) Pillar 2 initiative.

On December 22, 2023, the Swiss Federal Council introduced new legislation including a domestic minimum top-up tax (QDMTT) to “prevent erosion of the tax base in favor of the other countries,” that took effect January 1, 2024.

For now, the domestic minimum top-up tax is the only part of the proposed legislation that has been introduced. The introduction of the income inclusion and undertaxed profits rules has been postponed, to be determined at a later date while the Federal Council continues monitoring relevant international developments.

With that, the Federal Council took note that, amongst others, most EU countries and other Western industrialized nations—such as the United Kingdom and South Korea—opted to implement on the same date.

This development means that as of January 1, 2024, companies that are in scope, including multinational enterprises (MNEs) with a combined turnover exceeding EUR 750 million, will be subject to a minimum tax burden of 15%. For some Swiss companies, this may mean an increase, as a number of cantons have a tax rate lower then 15%. It’s now up to the cantons to decide and communicate how they’ll implement it.

These changes will no doubt mean additional reporting and record keeping burdens for some multinationals. With this in mind, we recommend you contact your tax advisers in Switzerland to ensure compliance and tax efficiency.

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