Swiss popular vote on 18 June 2023: OCDE/G20 project on minimum taxation of large corporate groups
Swiss citizens have received the official voting papers at home related to the popular vote on 18 June 2023. The first topic is notably related to the international taxation of multinational enterprises. What is it about?
I - Context
In a context of continuous digitalisation and globalisation, the OECD, of which Switzerland is a member, aim at imposing special taxation rules on large internationally active corporate groups. To this end, two key projects have been set out:
1- Pillar I consists of an allocation of taxing rights from the States where very large digital businesses are operating to the benefit of the States where the clients are located under certain conditions;
2- Pillar II consists of the introduction of a minimum tax rate of 15% for large international groups whose annual turnover exceeds 750 million euros.
The vote on 18 June will primarily cover the implementation of Pillar II in Switzerland, and in particular the agreement of the Swiss citizens on the modification of the Constitution to achieve this.
II - Implementation in Switzerland
In more concrete terms, it is estimated that this new minimum tax provision will only apply to 1% of companies currently based in Switzerland. This would include a few hundred Swiss groups and a few thousand Swiss subsidiaries of foreign groups.
Under the proposal, it is envisaged that presumably as from 2024 (timing shall be aligned with the international implementation of the OECD minimum taxation in the EU and other countries), the concerned companies will be subject to a supplementary tax allowing Switzerland to levy the difference between the 15% and their current tax rate when lower than the 15% (which varies according to the canton where they are based). The effective impact on their tax burden will thus depend on where the company is based in Switzerland. Indeed, some cantons currently have effective tax rates well below this 15% threshold (e.g. Zug with approx. 12%) while others are already close to or even above the proposed minimum rate of 15% (e.g. Zurich with approx. 20%).
The supplementary tax will be a federal tax but levied by the cantons. The details will be laid out in a new federal ordinance. 25% of the additional revenues will be allocated to the Federation, while 75% remains at the cantons where the tax is levied.
It should be noted that for the other 99% companies that do not meet the €750 million annual turnover requirement, they will maintain their current tax rate, which may be lower than 15%, in particular if they have a tax holiday granted by specific cantons or are benefitting from e.g. the patent box or R&D superdeduction etc.
- BEPS 2.0 implementation will have a direct impact not only on the tax position of multinationals but as well on other non-tax topics that are of great relevance (i.e., the multinational’s choice of capital structure, the location of intangibles and related R&D activities, the choice of the business operating model, etc.). Therefore, it is key that multinationals reassess where do they stand considering the new rules that will be implemented globally. As this could represent a very complex analysis for some multinationals a practical approach is needed.
For more information, our RSM experts will be happy to assist you.