Switzerland’s Progress on OECD’s Pillar Two Minimum Corporate Tax: Examining Key Provisions and Implications

June 5, 20230


Switzerland is taking significant steps in its adoption of the OECD’s Pillar Two minimum corporate tax framework. The Swiss Federal Council has recently launched the second public consultation on a transitional ordinance that will govern the implementation of this tax during the transition phase. The ordinance focuses on procedural and criminal tax law aspects, with provisions aiming to ensure compliance and effective enforcement. This article provides an overview of the key provisions of the updated draft ordinance and highlights important information from the commentary and the first public consultation.  


General Implementation of Pillar Two in Switzerland:  

To implement Pillar Two, Switzerland plans a constitutional amendment, a transitional ordinance, and subsequently a permanent tax bill. The constitutional amendment, subject to a public vote on 18 June 2023, would serve as the legal basis for the introduction of Pillar Two. The transitional ordinance, currently open for public consultation until 14 September 2023, aims to regulate the application of Pillar Two from 1 January 2024.  


Key Provisions of the Updated Draft Ordinance:  

The second version of the draft ordinance incorporates new provisions related to tax obligations, joint liability of Swiss constituent entities (CEs), procedural aspects, and criminal tax law. The ordinance includes the concept of a “one-stop shop,” where only one Swiss CE of a multinational enterprise (MNE) is subject to the Pillar Two tax. The CE’s canton of residence assumes responsibility for the tax assessment, allocating the revenue among the cantons and the Federation. Additionally, the ordinance confirms the application of transitional Country-by-Country Reporting (CbCR) safe harbor rules and defers the introduction of the Undertaxed Profits Rule (UTPR) in line with the European Union until at least 1 January 2025. 


Interaction with QDMTT, CFC, and GILTI Rules:  

Switzerland has made specific choices in the design of its Qualified Domestic Minimum Top-up Tax (QDMTT) based on the OECD’s Agreed Administrative Guidance. These choices include allowing flexibility in accounting standards for QDMTT calculation, using substance-based carveouts to reduce the tax burden, and permitting the deductibility of fines up to EUR 50,000. Notably, the commentary on the ordinance highlights that QDMTT does not consider controlled foreign company (CFC) and global intangible low-taxed income (GILTI) taxes, unlike the Income Inclusion Rule (IIR) and UTPR.  


Declaration, Assessment, and Appeals Procedure:  

Under the ordinance, Swiss CEs subject to Pillar Two taxes must file a self-declaration through an electronic portal, following a mixed assessment procedure similar to existing corporate income tax procedures. The Swiss CE responsible for IIR is also accountable for QDMTT and UTPR. Appeals against tax assessments can be made to the competent cantonal tax authority, with further appeal options available through the Swiss Federal Administrative Court and the Swiss Federal Supreme Court.  


Criminal Tax Law and Penalties:  

The criminal tax laws applicable to Pillar Two align with existing provisions for Federal Corporate Income Tax (CIT). Offenses related to Pillar Two taxes may lead to penalties, but during the period between fiscal years starting before 31 December 2026 and ending before 30 June 2028, negligent violations and tax evasion will not incur penalties, following OECD guidance.  


Implications and Outlook:  

Interested parties have until 14 September 2023 to provide feedback on the draft ordinance, after which the Swiss Federal Council will release the final version later in 2023. The implementation of Pillar Two is contingent on the outcome of the constitutional amendment and the international consensus on the global minimum tax project. Switzerland aims to align its implementation with other jurisdictions, such as the European Union. The UTPR is expected to be introduced in Switzerland no earlier than 1 January 2025. Revenue generated from Pillar Two taxes will be allocated to the Federation (25%) and the cantons (75%), enabling further investments in enhancing the country’s business attractiveness.  



Switzerland’s ongoing efforts to adopt the OECD’s Pillar Two minimum corporate tax demonstrate its commitment to international tax standards. The transitional ordinance, along with the upcoming constitutional amendment, aims to establish a robust framework for implementing Pillar Two, addressing procedural, criminal tax law, and compliance aspects. It is crucial for stakeholders to actively engage in the public consultation process and stay updated on developments in this evolving landscape. By aligning with global initiatives, Switzerland aims to foster tax transparency, enhance tax compliance, and strengthen its position as an attractive business destination. 

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