BEPS 2.0 Getting Real in Switzerland

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The OECD/G20 BEPS 2.0 project, the second stage of the Anti-Base Erosion and Profit Shifting program, is progressing at high speed. Switzerland reluctantly consented to the project, albeit making numerous reservations. On 20 December 2021, the OECD posted a high-level position paper regarding the global minimum tax of 15% (Pillar 2), whereby numerous items need to be clarified in the coming months. On 13 January 2022, the Swiss Minister of Finance held a press conference addressing the implementation of Pillar 2 in Swiss national law by 2024.

The BEPS 2.0 project consists of two pillars:

  • Pillar 1 (Unified Approach) introduces a new type of taxable nexus whereby companies with a global turnover of above EUR 20 billion and profitability of above 10% may become liable to tax in other countries, even without maintaining a physical permanent establishment. Moreover, this pillar covers new and highly complex rules for profit allocation among the countries in which a company is liable to tax.
  • Pillar 2 (Global Anti-Base Erosion – GloBE) establishes a global minimum tax of 15% for multinational enterprises with a global turnover of EUR 750 million or more.

The Swiss government plans to implement Pillar 2 in national law on the tight timeline set by the OECD. The parameters of the proposed Swiss rules, taking effect as from 1 January 2024, are as follows:

  • Change of the constitution, so that the cantons may introduce a minimum tax for internationally active groups with gross revenues exceeding EUR 750 million. The consolidated (federal, cantonal and communal) effective income tax rate should be at least 15%. In order to achieve the legislation at the requisite speed, the government proposes a fast-track procedure by way of change in the federal constitution which will provide the basis for the Federal Council to enact ordinances with the material content. The change in constitution will be subject to a public referendum in June 2023.
  • The additional tax revenue should be used by the cantons to “promote” their location, i.e. in one or another form, the additional funds levied should flow back to the companies concerned.
  • As mentioned, under the OECD proposal numerous items still need to be defined, amongst others also the calculation of the basis of the minimum tax. The “Adjusted GloBE Income” constituting the reference value will be an adjusted, consolidated income on IFRS/US GAAP basis of the Swiss entities belonging to a group.
  • The implementation of Pillar 1 will be planned in detail as soon as the multilateral convention envisaged by the OECD has been concluded (expected in the next months).

The Tax team will keep you informed of any further developments.

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