The Swiss Federal Council definitively adopts Pillar 2: Switzerland implements the OECD minimum tax from 2024

Which companies are concerned? What do they need to pay attention to? Here is an initial look at the key concepts behind the new QDMTT.  

Does the Swiss QDMTT apply to all entities located in Switzerland?

The Federal Ordinance on the Minimum Taxation of Large Corporate Groups (OLMin) stipulates that only a restricted circle of Swiss taxpayers, i.e., entities that meet the requirements imposed by the OECD/G20 GloBE Model Rules (see next question), will be subject to the Swiss QDMTT.

Other taxpayers not affected by this tax will continue to be taxed at the standard tax rate in their canton of residence.

Which entities are affected by this tax?

The QDMTT applies to Swiss constituent entities of multinational groups whose consolidated income exceeds the threshold of €750 million (over at least 2 of the 4 years preceding the relevant tax year).

It should also be noted that it is essential to check whether the country in which the group's ultimate parent entity is located has introduced a threshold lower than €750 million, in which case the latter will also apply to constituent entities located in Switzerland.

How is tax calculated?

The federal ordinance makes a direct reference to the GloBE Model Rules for calculating the Swiss QDMTT. A group will therefore have to follow the same method as the rules relating to the income inclusion rule (IIR). These steps involve notably the determination of the Effective Tax Rate, the calculation of the Top-up Tax and the application of the Substance-Based Income Exclusion.

The effective tax rate is computed on a jurisdictional basis and not on an entity basis. This is particularly important in Switzerland, where tax rates on profit and capital differ from one canton to another. Therefore, where the activities of Swiss companies are carried out in several cantons, the group can benefit from this variation when determining the effective tax rate of the group in accordance with the requirements of the GloBE Model Rules.

Finally, if a country's domestic top-up tax qualifies for the QDMTT Safe Harbour under the GloBE Model Rules (which should be the case for Switzerland according to the Swiss Federal Council), a multinational group will be allowed to make a single calculation under the Swiss QDMTT, thus avoiding a second complex calculation under the ordinary GloBE Model Rules.

Which accounting standard should be applied?

In principle, tax is calculated based on annual financial statements prepared in accordance with Swiss GAAP FER, provided that all Swiss constituent entities present their annual financial statements in accordance with this accounting standard and that they are audited by an external auditor. Otherwise, the accounting standard of the group's ultimate parent entity (e.g., IFRS) should be used.

Are there any exceptions to the calculation of the QDMTT ?

Before embarking on a detailed calculation of the QDMTT, it is essential to check whether the constituent entities located in Switzerland can benefit from the transitional CbCR (Country-by-Country-Reporting) Safe Harbour.

This scheme is valid for all tax years ending before 30 June 2028 and relieves taxpayers of the detailed QDMTT calculation.

To do this, the group must prove that it has reached the minimum tax level in Switzerland by using one of the simplified methods based on CbCR data:

• "Minimum threshold": revenues of less than €10 million and profits of less than €1 million in Switzerland.
• "Substance rule": deduction of substance, i.e., 5% on tangible assets and payroll costs - at the start of the application of GloBE Model Rules, this rate is 10% on payroll costs and 8% on tangible assets (degressive rate).
• "Effective tax rate rule": depending on the tax year, the tax burden is at least 15% (from 2025: 16%; 2026: 17%).

If one of the above conditions is met, the top-up tax is considered to be zero. It should be noted that if, for a given year, the group decides not to apply one of these tests or no longer meets the conditions, it loses its right to claim this protection scheme thereafter.

Which entity should fulfill the tax obligations in Switzerland?

The (new) "one-stop shop" principle is applicable to both the tax return filling and the levying of the tax. It is up to the group to determine, in accordance with the federal ordinance, which Swiss constituent entity is the taxpayer representing all the Swiss constituent entities of the group.

For example, if no international top-up tax is applicable in Switzerland (which is the case for the 2024 tax period), it is the "economically most important" constituent entity that will be subject to the QDMTT for all the constituent entities located in Switzerland. This criterion is defined by the Swiss constituent entity with the highest average balance sheet based on the last three annual accounts (excluding participations).

Another new feature is that the canton competent to collect the tax is the canton to which the taxable entity is fiscally connected at the beginning of the tax year, unlike the rule that currently applies for direct federal tax, i.e., subject to tax at the end of the tax year.

Is the QDMTT allocated between the Swiss entities concerned? Is there a tax risk in the event of incorrect allocation?

The Swiss QDMTT should be allocated between the Swiss constituent entities in accordance with allocation keys defined directly in the federal ordinance.

In the case of incorrect allocations, the tax must be reimbursed to the concerned constituent entity by the other constituent entity that should have borne the tax. In such a case, there is in principle no risk of recognition of a deemed dividend or a capital contribution by the Swiss tax authorities.

However, if no repayment is made, the Swiss tax authorities may recognised a deemed dividend or a capital contribution, with possible tax consequences in terms of Swiss withholding tax and issuance stamp duty.

Finally, what is the deadline for submitting the tax return?

The first GloBE Information Return (GIR) has to be filed by 30 June 2026 at the latest (i.e., 18 months after the last day of the tax year in question). For subsequent years, the filing deadline is 15 months after the last day of the tax year in question.

Our recommendations

The introduction of the QDMTT raises a number of fundamental and practical issues. First of all, the groups concerned must clearly define the scope of the Swiss QDMTT, which is based on the standard GloBE Model Rules.  

It is essential to collect the data and prepare the CbCR report in advance, at the same time as closing the accounts for the year in question, to be able to benefit from the transitional CbCR protection regime and avoid a full tax calculation.

Finally, the groups concerned are advised to check in the coming weeks whether their CbCR report meets the requirements of the GloBE Model Rules, particularly with regard to the accounting standard used by the group.

As some aspects of this new QDMTT are very complex, we are available to help you navigate this new legislative environment.