On March 11, 2022, the Swiss Federal Department of Finance published a press release announcing that the Swiss Federal Council has opened a public consultation on the implementation of the OECD/G20 minimum taxation for multinationals.
According to the press release the Swiss Federal Council intends to implement the joint OECD/G20 project on the taxation of the digital economy in Switzerland in stages, by establishing a new constitutional norm and transitional provisions. This was decided during the Federal Council’s meeting of March 11, 2022.
According to the press release OECD/G20 project on taxing the digital economy presents Switzerland with significant challenges. Because of the project the competitive advantage of low taxation will become less important. By implementing, the Federal Council intends to preserve Switzerland's competitiveness and create the conditions necessary to maintain jobs and tax revenues for the Federation, cantons and municipalities.
Securing tax revenues
The Federal Council is planning to ensure a minimum taxation in accordance with Pillar 2 of the OECD/G20 project by introducing a "supplementary tax”. In the case of large corporate groups, this supplementary tax will bridge the gap between a lower effective tax rate and the 15% minimum tax rate. For all other companies, in particular small and medium enterprises, nothing will change. The supplementary tax is to be implemented by the cantons.
According to the press release this method protects companies from additional tax procedures abroad and provides legal certainty. Current federal and cantonal corporate income taxes will be maintained without modifications. The implementation secures additional tax revenue for Switzerland, which would otherwise flow abroad. The additional tax revenue will create room for Switzerland to increase its attractiveness.
Staged approach
The OECD/G20 minimum taxation will result in a different treatment of affected and unaffected companies. This is why the implementation of the OECD/G20 project requires the creation of a new constitutional norm empowering the Federal Council to subject companies to different tax rates. In order to ensure entry into force on 1 January 2024, the Federal Council will be authorized to temporarily regulate the minimum taxation with a transitional provision by way of ordinance. The temporary ordinance will be replaced by a federal law approved by Parliament as soon as there is sufficient clarity on the application of international standards.
Implementation in stages
The minimum taxation set by the OECD and the G20 will result in a difference in treatment between the companies concerned and the others. This is why the implementation of the joint project of the OECD and the G20 requires the creation of a new constitutional norm empowering the Federal Council to subject companies to different tax rates. In order for the draft to enter into force on 1 January 2024, the Federal Council must be empowered, by a transitional provision, to temporarily regulate, by means of an ordinance, the minimum tax. As soon as the application of the international rules is sufficiently clear, Parliament will pass a federal law repealing this temporary ordinance.
Documents made available
With respect to this consultation the Swiss Government has released the following documents:
Preliminary draft of the Federal Decree (Available in: German, French and Italian)
Explanatory report (Available in: German, French and Italian)
Letter to the cantons (Available in: German, French and Italian)
Letter to the organizations (Available in: German, French and Italian)
List of addressees (Available in: German, French and Italian)
Presentation (Available in: German and French)
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