By Doug Connolly, MNE Tax
The Swiss Federal Council on January 12 decided that it will implement the 15% global minimum tax agreed by the OECD Inclusive Framework through a constitutional amendment with an aim to ensure the measure comes into force as of January 1, 2024.
The approach is intended to take time pressure off the ordinary legislative procedure. Given the democratic processes required in the country, the Swiss government has expressed concerns about the short implementation timeline under the OECD agreement. Nonetheless, Swiss implementation of the global minimum tax in 2024 would still be later than the timeline set in the OECD agreement for implementation, i.e., in 2023.
Under the new Federal Council agreement, implementation will be brought about through the creation of a constitutional basis with the involvement of Parliament, the cantons (i.e., Swiss states), and the people (via referendum). On this basis, the Federal Council will issue a temporary ordinance for the minimum tax to enter into force on January 1, 2024. The government may then prepare the legal basis to replace the ordinance through ordinary legislative processes without affecting the implementation timeline.
The Federal Council’s announcement of the minimum tax implementation plan also specifies that “nothing shall change for purely domestically focused companies.” This is in contrast to the EU directive, which would apply the minimum tax domestically to prevent conflict with EU anti-discrimination rules. Domestic minimum taxes are also contemplated in the UK and the US, while Spain already adopted one late last year. Ireland, on the other hand, has indicated that, for companies out of scope of the agreement, it plans no change to its 12.5% domestic tax rate.
The scope of the minimum tax in Switzerland will be in line with the OECD agreement, applying to multinational companies with annual revenues of EUR 750 million or more. The Federal Council also states that the additional taxes collected under the minimum tax will go to the cantons.
Regarding implications for the country’s attractiveness as a business location, the Federal Council acknowledged that certain companies will face higher tax burdens but added that “Switzerland will have fiscal policy leeway to counteract a possible loss of attractivity as a business location.”
Doug Connolly
Doug Connolly is Editor-in-Chief of MNE Tax. He has more than 10 years of experience covering tax legal developments, previously working with both a Big Four firm and a leading legal publisher. He holds a law degree from American University Washington College of Law.
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