The Swiss Federal Council has moved forward with the second phase of implementing the OECD's global minimum tax, targeting large multinational corporations like Nestlé and Novartis. Starting in 2025, if these companies are taxed below 15% abroad, Switzerland will impose an additional tax to make up the difference. This decision aims to keep tax revenues within Switzerland, as failing to impose the tax would allow other countries to claim it. The move comes after Swiss voters approved the constitutional basis for the OECD tax in 2023.
Switzerland has been proactive in adhering to the OECD's tax regulations, which require large companies with annual global revenues exceeding 750 million euros to pay at least 15% profit tax in every country they operate. The average profit tax in Switzerland is currently between 13% and 14%, necessitating this new supplementary tax. This tax ensures that Swiss-based corporations or subsidiaries of foreign companies aren't undertaxed domestically, thereby preventing other countries from levying additional taxes on their Swiss profits.
The Federal Council's decision also includes the Income Inclusion Rule (IIR), effective in 2025, which applies to foreign subsidiaries of Swiss companies that are taxed below 15% abroad. However, the implementation of the Under-Taxed Payments Rule (UTPR), which would apply to foreign corporations with subsidiaries in Switzerland, has been postponed due to legal uncertainties and potential political backlash, particularly from the U.S.
The global minimum tax initiative is primarily a European endeavor, with many non-European countries, including the U.S., China, and India, yet to implement it. Despite these challenges, Switzerland's approach aims to protect its tax base while adhering to international agreements. The Swiss business community largely supports this move, viewing the domestic tax as a lesser evil compared to potential foreign levies.
