SWITZERLAND Law and Practice Contributed by: René Matteotti, Monika Bieri, Daniel Schönenberger and Manuel Ulrich, Tax Partner AG
Pillar Two On 18 June 2023, the Swiss electorate voted on the implementation of the OECD/G20 minimum taxation (and the creation of the constitutional basis for the introduction of Pillar One), with the proposal being approved by 78.5%. The referendum was necessary as the introduction of the OECD/G20 minimum taxation required an amendment to the Federal Constitution. This was because the OECD/G20 minimum taxation would have contradicted the constitutional principle of equal treatment of taxpayers. With the approval of the constitutional amendment, which came into force on 1 January 2024, the Federal Council enacted the ordinance on minimum taxation at federal level on the same day. At the same time, some cantons also decided to increase tax rates for companies. It should be noted, however, that the minimum taxa - tion in Switzerland was limited to the national sup - plementary tax (qualified domestic minimum top-up tax, of QDMTT) for tax years starting from 1 January 2024. As for tax years starting as from 1 January 2025, Switzerland decided to also introduce the income inclusion rule (IIR). The Federal Council has refrained from applying the undertaxed profit rule (UTPR) for the time being. The introduction of the minimum taxa - tion results in a tax increase for relevant corporate groups, provided the GloBE effective tax rate (ETR) in Switzerland is below 15% (and no corresponding substance-based income exclusion applies). It is to be seen how Switzerland will react on the recently published Side-by-Side Package. It is obvious, that Pillar Two (as well as Pillar One) poses major challenges for Switzerland. Low taxes, clearly a locational advantage for Switzerland, will lose importance. However, the liberal economic system – in particular, the liberal labour law – good infrastruc - ture, the first-class education system and the com - paratively moderate corporate tax burden are reasons why Switzerland is, and will continue to be, a popular location for group headquarters and entrepreneurial activities that yield high residual profits, despite quite high labour costs by international standards. Even though the effective Swiss tax burden may increase for multinational companies that fall under the Pillar Two regime, their higher tax costs may be
offset by other benefits: the cantons are analysing how to use the expected additional tax revenues from the additional qualified domestic top-up tax, and it can be expected that they will take measures to maintain and even improve their attractiveness. In this context, the instrument of the qualified refundable tax credit (QRTC) and the introduction of new subsidy schemes as new substance-based tax incentives will play an important role. Given this situation, there will also be a significant tax rate differential between Switzerland and many other jurisdictions after Pillar Two, so foreign tax authorities are expected to continue to be increasingly interested in intra-group transactions with Swiss companies. 9.5 Pillar One Amount B As of 3 February 2026, there is no specific Swiss domestic implementation of Pillar One Amount B in the form of a dedicated statutory regime or published Swiss administrative safe harbour rules or other prac - tice. Switzerland expressly notes the ongoing work on Amount B implementation under the OECD frame - work and is waiting for reactions of other states with a decision on whether and how to implement Pillar One Amount B. 9.6 Entities Bearing the Risk of Another Entity’s Operations From a contract and commercial law perspective, a group can freely allocate risks and functions to be assumed between its entities. With a view to the acceptance of such an allocation, the FSC held, in favour of the taxpayers, that the tax administration must recognise the contractual distribution of func - tions and risks undertaken by group entities, if these were not merely sham structures. However, as the tax administrations are also follow - ing a substance-over-form approach in the area of transfer pricing, the splitting up of the assumption of risks and functions is increasingly questioned by the tax authorities. In particular, the tax administrations will evaluate whether the personnel of a risk-bearing entity were effectively able to manage and control the assumed risks.
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