Implementation of the OECD/G20 project on the taxation of large corporate groups

On Sunday, the people and the cantons approved the federal decree of 16 December 2022 on special taxation of large corporate groups (implementation of the joint OECD/G20 project on the taxation of large corporate groups).

Results: 78,45% Yes; 21,55% No

The Federal Council can thus enact in an ordinance the provisions enabling the application of a minimum taxation of 15% to large corporate groups until the legal provisions enter into force. This is expected to be 1 January 2024, subject to developments in other states.

Who is affected?

The constituent entities of a multinational group of companies with a consolidated annual turnover of EUR 750 million. According to the federal administration, this should concern a hundred Swiss groups and a few thousand foreign groups with a presence in Switzerland. This will put this in touch with more than 600,000 companies active in Switzerland in 2020 according to statistics. Thus, most of them will not be affected by the reform and will continue to be taxed at the current rate.

What should affected companies do?

The application of Global Anti-Base Erosion Rules (GloBE Rules) is quite complex. A multinational group must, ins a first step, determine whether it falls within the scope of these new GloBE Rules and identify the constituent entities within the group and their location. Next, the actual tax of each constituent entity must be determined. If a multinational enterprise is subject to an effective tax rate of less than 15% in any jurisdiction, the next step establishes the mechanism for calculating the top-up tax in relation to that low-tax jurisdiction. The top-up tax is then collected from a group entity in accordance with the agreed GloBE Rules.

Is any relief available in applying these GloBE Rules?

Yes, multinational enterprises that are subject to transfer pricing documentation rules and Country-by-Country Reporting (CbCR), applicable from 2018, will be able to benefit from certain relief (Safe Harbours) in the application of these new GloBE Rules for a transitional period of three to four years from their entry into force. Such relief could eventually be made permanent.

What are our recommendations?

The Federal Council’s ordinance is expected to be published at the end of the summer. Find out the status of the publication and, once published, deal in detail with the provisions it contains. The provisions will enable affected companies in Switzerland to correctly apply the new international GloBE Rules. By then, the planned Safe Harbours should also be known.