Switzerland conditionally supports key parameters for international corporate taxation
Bern, 01.07.2021 - On 1 July 2021, the OECD Inclusive Framework, with 139 member countries at present, published key parameters for the future taxation of large companies that operate internationally. Switzerland supports these in the sense of continuing the work, while maintaining its reservations and conditions. The key parameters provide for a moderate shift of taxing rights to market jurisdictions and a global minimum tax rate of at least 15%.
Despite major reservations, Switzerland – like a few other countries – conditionally supports these key parameters in the sense of continuing the project. For example, Switzerland explicitly called for the interests of small, innovative countries to be appropriately taken into account in the final design of the rules and national legislative procedures to be respected in terms of implementation. In addition, the new rules should be applied uniformly by the member countries and a balanced solution should be found between tax rate and tax base in the case of minimum taxation. Accordingly, Switzerland also intervened during today's Inclusive Framework meeting.
A multilateral agreement should ensure that a proliferation of national solutions is prevented and thereby create legal certainty. Numerous countries, especially large ones, had announced that they would go it alone if an OECD solution failed. Potentially affected companies in Switzerland had already stressed the importance of a multilateral agreement.
Large companies affected
The new rules are divided into two pillars and will affect large multinationals. The OECD is to work out the details by the end of 2021:
- Pillar 1 provides for a shift of taxing rights to market jurisdictions. Companies with more than EUR 20 billion in annual turnover and a profit margin of more than 10% will have to pay tax on some of their profits in the market area. In Switzerland, this is likely to concern less than a handful of large companies.
- Pillar 2 provides for a minimum tax rate of at least 15% for companies operating internationally with more than EUR 750 million in annual turnover. Around 200 Swiss companies plus a large number of Swiss subsidiaries of foreign groups exceed this turnover threshold.
In parallel to the further work of the OECD, the Federal Department of Finance, in close collaboration with other departments and with the involvement of the cantons, cities, businesses and the scientific community, will, by the first quarter of 2022, draw up internationally accepted proposals for the Federal Council that will secure the appeal of Switzerland as a business location.
The OECD project was originally launched in order to better capture multinational digital groups with no physical market presence in the tax system. In the course of the deliberations, the focus expanded to general minimum taxation for large multinationals.
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