Switzerland implements OECD minimum tax for groups from January 1, 2024
Published: Friday, Dec 22nd 2023, 13:20
Updated At: Friday, Dec 22nd 2023, 13:20
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Large internationally active companies will be taxed at a rate of at least 15% in Switzerland in future. The Federal Council decided on Friday to introduce part of the OECD/G20 tax reform as planned on January 1, 2024.
To date, many cantons have some of the lowest tax rates for corporations in the world. They argue that these are necessary to attract companies despite high wages and location costs.
In the global fight against tax havens, 140 countries have agreed to tax large corporations globally at a minimum rate of 15%. Switzerland also wants to implement the plan of the Organization for Economic Cooperation and Development (OECD) and the G20 - an informal association of the 19 most important industrialized and emerging countries.
The minimum tax will affect companies with a global annual turnover of over 750 million euros - around one percent of companies operating in Switzerland. The Federal Council estimates that the new OECD minimum tax will raise between one and 2.5 billion Swiss francs. Of this, 75 percent, i.e. around 800 million to 2 billion francs, will go to the cantons and 25 percent, i.e. around 250 to 650 million francs, to the federal government.
Postponement recommended
The Federal Council is following various guidelines for implementation. For example, the Swiss regulations should be internationally accepted in order to ensure the greatest possible legal certainty for companies based in Switzerland.
In addition, where the OECD/G20 regulations explicitly permit or provide for it, leeway and options should be used in the interests of Switzerland as a business location. Overall, the administrative burden for companies and cantonal tax administrations should be kept as low as possible.
The Federal Department of Finance (FDF) wrote in a press release that the entry into force on January 1, 2024 will prevent tax revenue from flowing abroad. The vast majority of EU states and other western industrialized nations such as the UK and South Korea will also bring the regulations into force at the start of 2024.
Nevertheless, the Federal Council waited until the last moment. In mid-November, the Economic Affairs Committees of both chambers (WAK-N/S) recommended that the federal government consider postponing the entry into force of the minimum taxation by one year for the time being. The Federal Council has now rejected this.
Introduction not completed
Minimum taxation is implemented in Switzerland with an amendment to the ordinance, which provides for the levying of a new supplementary tax in Switzerland. This required an amendment to the constitution. The people and cantons clearly approved this last June. After six years, the Federal Council must submit a federal law to parliament.
The Federal Council will decide on the introduction of further elements of the reform at a later date, as it wrote. For example, Switzerland will not yet make use of the new taxation rights from the beginning of 2024 if a group of companies operating in Switzerland does not reach the minimum taxation level abroad.
The Federal Council will monitor further international developments on the so-called Income Inclusion Rule (IIR) and the Undertaxed Payments Rule (UTPR) and decide on their introduction at a later date - "if this is appropriate in order to safeguard Switzerland's interests", it said.
Further reform pillar pending
The OECD/G20 tax reform also includes another pillar. This provides for the world's hundred largest companies to be taxed in future not only in their country of domicile, but also where their services are consumed. According to the Federal Administration, between three and five Swiss companies are affected by this - including the chemical companies Novartis and Roche as well as the food giant Nestlé.
This first pillar is to be implemented with a multilateral agreement, as announced by the State Secretariat for International Financial Matters (SIF) in the summer. Switzerland actively participated in the development and negotiations of all measures.
©Keystone/SDA
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