During its meeting of January 12, 2022 the Federal Council decided to implement the minimum tax rate for certain companies as agreed by the OECD and G20 member states by means of a constitutional amendment. Based on that decision, a temporary ordinance should ensure that the minimum tax rate comes into force on January 1, 2024. The law will be enacted subsequently in the ordinary manner.
The amendment of Swiss law will be carried out with a sense of proportion and focusing on an attractive business location. With the involvement of Parliament, the cantons and the people (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 issue a temporary ordinance that implements the minimum tax rate as of 1 January 2024. Thereafter, the legal basis can be prepared in an ordinary legislative procedure without time pressure and the ordinance will be replaced.
A minimum tax rate of 15% for multinational companies with 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 incorporation of a minimum tax rate into Swiss law ensures that large companies do not get involved in foreign proceedings. Furthermore, Switzerland should not forgo any tax receipts to which it is entitled to.
The minimum tax should be collected in a targeted manner and with due regard for federalism. Nothing shall change for purely domestically focused companies and SMEs. The Federal Council has adopted the following content-related parameters:
· Ensure the minimum tax rate for multinational companies with annual turnover of at least EUR 750 million (see basic information).
· Collection of the additional taxes by the cantons. The additional tax receipts go to the cantons.
· The additional tax receipts are subject to the general rules for national fiscal equalization.
Implications for Switzerland as a business location
Certain companies will face a heavier tax burden. The minimum rate will spare them additional tax proceedings abroad. Switzerland will have fiscal policy leeway to counteract a possible loss of attractivity as a business location. The cantons will make sovereign decisions on measures in favour of the location.
The Confederation, cantons, cities and communes will work closely together on the implementation of the proposal. Among other things, the Federal Department of Finance has set up a political consultative body in which all three levels of government are represented.
In this respect the Swiss Government has also published a Factsheet regarding Implementation of the OECD minimum tax rate in Switzerland which you can download here.
The Swiss Government has also published a Q&A on the implementation of the OECD minimum tax rate in Switzerland, which you can download here.
In the Q&A document a.o. the following questions are discussed on a high level:
· What is provided for by the OECD rules on minimum taxation?
· Why did Switzerland agree to this minimum tax rate?
· To what extent can the OECD prescribe and control a uniform assessment base?
· What is the OECD's timetable, when will the OECD's final rules and guidance on the minimum tax be available and what does this mean for Switzerland?
· Why should implementation of the OECD minimum tax rate in Switzerland be addressed with a constitutional basis, of all things, and why is a law not sufficient?
· Will the OECD recognise the "Swiss way" and what will happen if the OECD rules enter into force as of 1 January 2023, but the ordinance does not enter into force in Switzerland until 1 January 2024?
· What does the minimum tax rate generally mean for tax competition among the cantons?
· What does the minimum taxation mean for cantons that have applied a corporate tax rate of less than 15% up to now?
· Individual cantons will generate additional receipts with the introduction of the minimum tax rate. How can they use them?
· Which locational measures are available to the cantons and how is it possible to ensure that certain measures cannot be "hidden"?
· Can the Confederation ensure that the cantons formulate their locational measures
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