January 14 2022

Federal Council Decides To Implement OECD Corporate Minimum Tax Through Constitutional Amendment

Source: IBFD Tax Research Platform News

In its meeting of 12 January 2022, the Swiss Federal Council decided to implement the minimum tax rate for certain companies agreed by the OECD and G20 member states by means of a constitutional amendment. Based on that decision, a temporary ordinance will ensure that the minimum tax rate comes into force on 1 January 2024.

The Federal Council noted that the amendment of Swiss law will be done with a sense of proportion and focusing on an attractive business location. With the involvement of the parliament, the cantons and the people (through a referendum), a new constitutional basis will be created in order to provide legal certainty for the affected companies. On that basis, the Federal Council will first issue a temporary ordinance that implements the minimum tax rate as from 1 January 2024. Subsequently, the legal basis will be prepared in an ordinary legislative procedure without time pressure, and the ordinance will be replaced.

The plan providing for a minimum tax rate of 15% for multinational companies with a turnover of more than EUR 750 million has been agreed by 137 countries. If a country maintains lower tax rates, other countries can impose an additional tax on those undertaxed companies. The Federal Council stated that the incorporation of a minimum tax rate into Swiss law thus ensures that large companies do not become involved in foreign proceedings. Furthermore, Switzerland should not forego any tax receipts to which it is entitled.

In Switzerland, the minimum tax will be collected in a targeted manner and with due regard for federalism, i.e. nothing will change for purely domestically focused companies and SMEs. In this regard, the Federal Council has adopted the following content-related parameters:

  • ensuring the minimum tax rate for multinational companies with annual turnover of at least EUR 750 million;
  • collection of the additional taxes by the cantons. The additional tax receipts go to the cantons; and
  • additional tax receipts are subject to the general rules for national fiscal equalization.