Taxing the digital economy

Digitalisation is changing the economy and many business models. Consequently, the Organisation for Economic Co-operation and Development (OECD) is preparing proposals as to how corporate taxation can be adapted to the new developments in the longer term. Switzerland is actively involved in this work.     

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The OECD published a programme of work on the tax challenges arising from the digitalisation of the economy on 31 May 2019. Global and consensus-based measures should help to avoid a proliferation of national unilateral measures. Such unilateral actions would hinder innovation and economic growth, and create legal uncertainty. It is planned for the new rules not only to affect large international digital companies as originally forseen, but the entire, increasingly digitalised international economy. 

Programme of work OECD

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.

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.

And what about Switzerland?

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

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. 

Further information 

Last modification 13.07.2021

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