Background: Switzerland and OECD Pillar Two
Switzerland voted in favour of implementing the OECD/G20 Inclusive Framework Global Minimum Tax (Pillar Two) in a federal referendum on 18 June 2023, with 78.5% approval. The Federal Council enacted the Supplementary Tax Ordinance (Ergänzungssteuerverordnung) effective 1 January 2024. The definitive Federal Act on the Supplementary Tax (ALBAG / EStG) passed Parliament in late 2023 and applies from 2024.
Who Is Affected?
The Swiss rules apply to multinational enterprise (MNE) groups that meet both of the following thresholds:
- Consolidated annual revenue exceeding EUR 750 million in at least two of the preceding four fiscal years
- At least one entity (constituent entity) located in Switzerland or abroad within the group
Purely domestic Swiss groups are out of scope. Swiss SMEs without foreign subsidiaries are generally not affected.
Three Key Charging Mechanisms
1. QDMTT — Qualified Domestic Minimum Top-Up Tax
Switzerland's QDMTT collects additional tax from Swiss constituent entities whose effective tax rate (ETR) falls below 15% under GloBE rules. The QDMTT revenue remains in Switzerland rather than flowing to a foreign parent's jurisdiction. Cantons with effective rates already above 15% (e.g. Bern, Geneva) generate no QDMTT liability for most groups. Cantons such as Zug (effective ~11.9%) and Nidwalden (~12.5%) will generate QDMTT top-ups for many multinationals.
2. IIR — Income Inclusion Rule
Where a Swiss parent entity (ultimate parent entity, UPE) has low-taxed foreign constituent entities, Switzerland's IIR permits the ESTV to collect top-up tax in Switzerland on those foreign entities' under-taxed income. This applies at the level of the Swiss UPE or intermediate parent entity (IPE).
3. UTPR — Undertaxed Profits Rule
Switzerland has deferred full UTPR implementation. As a backstop, UTPR would allow Switzerland to tax residual under-taxed profits not picked up by the UPE's IIR. Switzerland will adopt UTPR once the OECD peer review framework confirms appropriate global implementation.
GloBE ETR Computation: Key Differences from Swiss Statutory
The GloBE effective tax rate is not the same as the statutory cantonal/communal/federal rate. Key differences include:
- Deferred tax adjustments: GloBE uses a modified deferred tax approach; timing differences from Swiss GAAP or IFRS must be re-mapped to GloBE rules
- Substance-based income exclusion (SBIE): A floor exclusion based on 5% of payroll costs and 5% of tangible asset book value reduces the GloBE income subject to top-up tax — Swiss manufacturing entities with significant assets benefit here
- Non-deductible expenses: Certain items deductible under Swiss law are added back for GloBE purposes
- Pillar One cross-references: Amounts reallocated under Amount A (if ever implemented) may interact with GloBE income
Filing Obligations
Swiss UPEs and designated local filing entities must submit a GloBE information return (GIR) to the ESTV. The deadline is 15 months after fiscal year-end (18 months for the transitional year). ESTV published its GIR filing portal guidance in Q1 2024.
Safe Harbours
The OECD transitional CbCR safe harbour applies for 2024–2026: if a jurisdiction's CbCR shows an ETR above 15% (simplified), no further GloBE computation is required for that jurisdiction. Most Swiss cantons with statutory rates above 15% benefit from this safe harbour for most groups.
Action Items for Swiss CFOs
- Map all constituent entities globally and assess which jurisdictions fall below 15% ETR under GloBE rules
- Quantify the SBIE to reduce GloBE income exposure
- Prepare or obtain the required GloBE information return data from your group accounting system
- Assess whether the transitional CbCR safe harbour applies for each jurisdiction
- Engage a qualified Swiss tax advisor (Steuerberater or Treuhänder) for the initial GloBE computation
Source basis: ESTV Supplementary Tax Ordinance 2024 · OECD GloBE Model Rules 2021 · Swiss Federal Act ALBAG · OECD Administrative Guidance Feb/Jul 2023.