All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Switzerland looks to remain competitive under global minimal taxation

Sponsored by

Sponsored_Firms_deloitte.png
Switzerland will introduce income inclusion rules

René Zulauf and Manuel Angehrn of Deloitte Switzerland explain why the country prefers a multilateral solution to tackling questions on minimum taxation.

On July 1 2021, the OECD agreed on the general outline of an inclusive framework with regards to the future taxation of multinational enterprises. Switzerland, home of many multinational companies and one of the most competitive countries for attracting multinationals, supports the OECD framework.

Switzerland much prefers a multilateral solution on a global scale in this question, to a myriad of uncoordinated attempts by individual countries to tackle minimum taxation with unilateral legislation. A global solution on an OECD level will provide much needed certainty and stability, a key element to enable businesses to plan, innovate and grow.

While only a handful of Swiss based multinationals will likely be affected by OECD pillar one (taxation of large multinationals where the income is generated), OECD pillar two (minimum taxation of 15%) will impact Swiss subsidiaries of foreign multinationals on a broader scale.

A large number of Swiss cantons currently offer headline tax rates (effective federal/cantonal/communal tax rates) below 15%, some of which are below 12%. Indeed, inter-cantonal tax competition within Switzerland, where cantons compete for taxpayers with hard factors, such as low tax rates, and even more so with soft factors (applying a more business friendly, more reasonable approach on all questions of taxation) is the key element that ensures the most competitive tax environment possible.

Although a minimum tax of 15% marginally narrows the differences in tax rates, the competitive spirit will remain that ensures Switzerland will continue to offer a very attractive tax environment for multinationals and keep its competitive edge internationally.

The OECD and G20 members have committed themselves to a swift implementation of the inclusive framework with a targeted ratification and incorporation into domestic legislation by 2023. Anticipating the current momentum of the global commitment, the Swiss federal government has been assessing domestic legislation since late 2019 and intends to publish its legislative agenda and domestic implementation plan in early 2022, once more technical details have emerged from the OECD working groups and after consultation with cantons, political parties and interest groups.

Based on current discussions, Switzerland will introduce income inclusion rules to provide its domestic ultimate parent entities (UPE) with an efficient administrative procedure for compliance with the pillar two framework. The government is further reviewing its possibilities within the inclusive framework and accepted global standards to compensate businesses for the increased income tax burden from the 15% minimum tax. This includes measures such as the planned abolishment of the 1% capital issuance tax on equity contributions, an example of likely many to follow of how Switzerland will ensure to remain a very enticing jurisdiction for multinational companies.

 

René Zulauf

Partner, Deloitte Switzerland

E: rzulauf@deloitte.ch

  

 

Manuel Angehrn

Senior Manager, Deloitte Switzerland

E: maangehrn@deloitte.ch

 

more across site & bottom lb ros

More from across our site

The Italian government published plans to levy capital gains tax on cryptocurrency transactions, while Brazil and the UK signed a new tax treaty.
Multinational companies fear the scrutiny of aggressive tax audits may be overstepping the mark on transfer pricing methodology.
Standardisation and outsourcing are two possible solutions amid increasing regulations and scrutiny on transfer pricing, say sources.
Inaugural awards announces winners
The UN’s decision to seek a leadership role in global tax policy could be a crucial turning point but won’t be the end of the OECD, say tax experts.
The UN may be set to assume a global role in tax policy that would rival the OECD, while automakers lobby the US to change its tax rules on Chinese materials.
Companies including Valentino and EveryMatrix say the early adoption of EU public CbCR rules could boost transparency of local and foreign MNEs, despite the short notice.
ITR invites tax firms, in-house teams, and tax professionals to make submissions for the 2023 ITR Tax Awards in Asia-Pacific, Europe Middle East & Africa, and the Americas.
Tax authorities and customs are failing multinationals by creating uncertainty with contradictory assessment and guidance, say in-house tax directors.
The CJEU said the General Court erred in law when it ruled that both companies benefitted from Italian state aid.