Taxing the digital economy

The Inclusive Framework of the OECD with more than 140 member countries, including Switzerland, published benchmarks for the future taxation of large, internationally active companies in October 2021. 137 member countries, including all OECD, G20 and EU countries, have agreed on a two-pillar solution for the tax challenges arising from the digitalisation of the economy. The new rules do not only affect large international digital companies, as was originally the case, but the entire, increasingly digitalised international economy. Global, consensual measures prevent national solutions and promote innovation, economic growth and legal certainty.

The project is divided into two pillars:

Pillar 1 aims to adapt the current international provisions on the tax allocation of profits of large corporate groups (market state taxation). Companies with an annual turnover of more than 20 billion euros and a profit margin of more than 10 percent are affected by the scope.

Pillar 2 aims to introduce a minimum taxation of 15% for internationally active groups of companies that reach the threshold of 750 million euros turnover. The model regulations and the associated commentary were published in December 2021 and March 2022 respectively.

And what about Switzerland?

Switzerland prefers long-term, consensus-based multilateral solutions rather than a multitude of uncoordinated national measures.

Switzerland is calling for the interests of small, economically strong countries to be taken into account when implementing them. It is in favour of innovation and prosperity-friendly rules that are applied uniformly worldwide and are subject to a dispute settlement mechanism. The aim is to create legal certainty for affected companies.

In January 2022, the Federal Council decided to implement the minimum tax rate agreed by the OECD and G20 member states by means of a constitutional amendment. Based on that decision, a temporary ordinance should ensure that the minimum tax rate can come into force on 1 January 2024. The law will be enacted subsequently in the conventional manner. Parliament agreed on the constitutional article on the OECD minimum tax in December 2022 and the Swiss electorate approved the project in June 2023.

On 22 December 2023, the Federal Council decided to implement the OECD minimum taxation with the introduction of a supplementary tax in Switzerland from 1 January 2024. This will prevent tax revenue from flowing abroad. The Federal Council will decide on the introduction of further elements of the OECD minimum taxation (international supplementary tax) by the end of 2024.

Implementation of the OECD minimum tax rate in Switzerland (link to the website of the FDF)