Taxing the digitalized 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.
The Inclusive Framework of the OECD/G20 (IF) 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
Pillar 1 defines who is allowed to tax the profits of multinational corporations. It is a reaction to the digital services taxes introduced in various countries.
The main elements of Pillar 1 are:
(i) The creation of a new right for consumer states (market states) to tax a portion of the profits (amount A) of multinational corporations. This applies to companies with an annual turnover of over 20 billion euros and a profit margin of over 10 per cent.
(ii) The prohibition of digital services taxes and relevant similar measures.
(iii) A simplified approach for the application of the arm's length principle for certain activities of multinational enterprises (amount B). The arm's length principle states that transactions between two companies in a group must be based on transfer prices that correspond to those between independent business partners.
Pillar 2
Pillar 2 would introduce a minimum tax rate of 15 per cent for multinational groups that reach the threshold of 750 million euros in revenue.
Switzerland's position and next steps
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.
Pillar 1
With the exception of Amount B, a multilateral agreement is required to implement the elements of Pillar 1. The work and negotiations on this (Multilateral Convention to Implement Amount A of Pillar One, MLC) in the Task Force on the Digital Economy (TFDE) of the IF have been ongoing since November 2021. At the IF level, a final package for Pillar 1 has not yet been adopted.
Switzerland has always supported consensus-based decision-making within the IF. SIF has actively participated in the negotiations on Pillar 1 and contributed Switzerland's positions. Should Pillar 1 be adopted at the IF level, the Federal Council will have to decide on whether to sign the MLC. Subsequent ratification would also require parliamentary approval The interested parties are also involved in these domestic processes
Pillar 2
Work on pillar 2 is already more advanced. The model rules on minimum taxation were published in December 2021. The associated commentary from March 2022 was updated in April 2024 and May 2025. At the IF level, new administrative guidelines are continuously being published with the aim of clarifying ambiguities in the model regulations published in 2021. SIF is actively participating in these negotiations and representing Switzerland's positions.
In January 2022, the Federal Council decided to implement the minimum tax with a constitutional amendment. In December 2022, Parliament agreed on the constitutional article for the implementation of the minimum tax, which was approved by the Swiss electorate in June 2023. This constitutional amendment forms the legal basis for the national implementation of both pillars of the OECD/G20 IF on BEPS.
On 22 December 2023, the Federal Council also decided to implement the minimum taxation with the introduction of a surtax in Switzerland from 1 January 2024. This prevents tax revenue from flowing abroad and creates stable framework conditions. Minimum taxation came into force on January 1, 2024, on the basis of a temporary ordinance. The law will subsequently be enacted in the normal manner. On September 4, 2024, the Federal Council decided to implement the primary international supplementary tax from January 1, 2025, but has decided not to implement the secondary international supplementary tax for the time being.
Implementation of the OECD minimum tax rate in Switzerland (link to the website of the FDF)