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.     

Grafik_digitale Besteuerung_12.19_e

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 8 October 2021, the Inclusive Framework of the OECD, in which 140 member countries including Switzerland participates, fleshed out the key parameters for the future taxation of large, internationally active companies. These were published back in July 2021.

The new rules are divided into two pillars and will affect large multinationals. The OECD is to work out the details on an ongoing basis by mid 2022:

  • 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 a single-digit number of large companies.

  • Pillar 2 provides for a minimum tax rate of 15% for companies operating internationally with an annual turnover of at least EUR 750 million. A low three-digit number of Swiss companies plus a low four-digit 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. 

In this context, Switzerland is committed to rules that foster innovation and prosperity, that are applied uniformly worldwide and that are subject to a dispute settlement mechanism. The aim is to create legal certainty for affected businesses.

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.

Implementation of the OECD minimum tax rate in Switzerland

Further information 

Last modification 25.03.2022

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