Switzerland’s Approach to Pillar 2 Implementation

The Organisation for Economic Co-operation and Development’s (OECD) Pillar 2 initiative establishes a global minimum tax for large multinational enterprises. The framework ensures these corporate groups pay a minimum level of tax on income in each jurisdiction where they operate. Switzerland has formally committed to adopting these rules, integrating them into its national legal system and aligning with over 140 other jurisdictions.

By embracing the Pillar 2 framework, the country aims to safeguard its tax base while maintaining a competitive environment for businesses. The implementation reflects a balance between adhering to new international norms and preserving the nation’s fiscal sovereignty.

Switzerland’s Implementation Approach

Switzerland has taken a phased approach to embed the Pillar 2 rules into its domestic law, beginning with a national constitutional amendment. This legal step was approved by Swiss voters in June 2023, granting the federal government the authority to implement the global minimum tax rules via a temporary ordinance. This method allowed for a swift adoption of the international standards.

Switzerland’s strategy is the introduction of a Qualified Domestic Minimum Top-up Tax (QDMTT), effective January 1, 2024. A QDMTT allows a country to collect the difference between the effective tax paid by a multinational’s local entities and the 15% global minimum rate. By implementing a QDMTT, Switzerland ensures that additional tax revenue from low-taxed Swiss profits is collected domestically rather than being paid to other countries.

This initial phase focuses on the QDMTT, as the Federal Council has postponed implementing the other Pillar 2 components: the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR). This gradual approach allows Swiss companies and tax authorities to adapt to the new domestic requirements first. A feature of the Swiss plan is the allocation of new tax revenue, with a portion designated for the cantons to reflect the country’s federal structure.

Scope of Pillar 2 in Switzerland

The Pillar 2 rules in Switzerland apply to large multinational enterprise (MNE) groups with operations in more than one country. The primary factor for inclusion is a financial threshold. MNE groups with annual consolidated revenues exceeding €750 million in at least two of the four preceding fiscal years fall within the scope of the new regulations, aligning with the OECD standard.

The regulations affect both Swiss-headquartered MNEs and the Swiss-based entities of foreign MNEs. A Swiss parent company of a global group is responsible for compliance, as is a Swiss subsidiary of a foreign-led group that meets the revenue test. The obligations for entities operating in Switzerland apply regardless of where the ultimate parent company is located.

Swiss law provides for specific exclusions for certain types of entities, which are not subject to the top-up tax calculations. These “Excluded Entities” include governmental entities, international organizations, and non-profit organizations. Certain investment funds and real estate investment vehicles may also be excluded if they meet specific criteria.

The Swiss Top-Up Tax Calculation

The goal of the Swiss top-up tax is to ensure an MNE group’s profit in Switzerland is taxed at an effective rate of at least 15%. If the rate is below this minimum, a top-up tax is levied. The process begins by calculating the Effective Tax Rate (ETR), which is the group’s Adjusted Covered Taxes divided by its GloBE Income.

GloBE Income serves as the tax base and starts with the net income or loss from the financial accounting statements of the Swiss entities. This figure is then subjected to a series of adjustments as prescribed by the OECD’s GloBE rules to ensure a standardized base. These adjustments can include modifications for certain dividends and capital gains, creating a uniform measure of profit across different jurisdictions.

Adjusted Covered Taxes represent the numerator in the ETR calculation. This amount begins with the current tax expense accrued in the financial statements related to Swiss income and capital taxes. This figure is then adjusted for several items, such as the treatment of deferred tax assets and liabilities, to accurately capture the taxes paid on the GloBE Income base.

If the calculated ETR for Switzerland is below the 15% minimum, a top-up tax is due on the excess profit. Excess profit is the GloBE Income minus a “substance-based income exclusion,” a carve-out based on a percentage of tangible assets and payroll costs in Switzerland. This exclusion is designed to protect returns on substantive economic activities. The resulting figure is multiplied by the top-up tax percentage, which is the difference between 15% and the Swiss ETR.

Filing and Administrative Requirements

Companies within the scope of Pillar 2 must follow specific administrative procedures. The primary global compliance document is the GloBE Information Return (GIR), a standardized report for MNEs to provide information about their global operations and tax calculations.

In Switzerland, a designated Swiss entity of an MNE group must file a top-up tax return and remit any payment. The Swiss Federal Tax Administration developed a web-based application, OMTax, available in 2025. This platform allows companies to fulfill their Swiss registration and filing obligations electronically.

The Swiss top-up tax return is based on data from the GIR, but the GIR itself may be filed in another jurisdiction. If an MNE group files its GIR in another country, the Swiss entity must notify the Swiss tax authorities of the filing location. The OMTax platform is used for fulfilling domestic top-up tax obligations in Switzerland.