According to the IIR, the profits of direct and indirect foreign subsidiaries of Swiss business units are subject to minimum taxation of 15%, where they are part of a corporate group that earns consolidated revenues of at least EUR 750 million, and thus falls within the scope of the OECD minimum tax, unless any under-taxed excess profit is already covered by a QDMTT (national top-up-tax).
The aim pursued in introducing the rule
The Federal Council argues that, in introducing the IIR, Switzerland will secure tax revenues that can be used to strengthen the country as a place to do business. Had Switzerland failed to introduce the IIR, the foreign tax substrate that will in future be acquired by virtue of the IIR in Switzerland would in most cases be subject to the Undertaxed Payment Rule (UTPR) in other countries.
It is difficult to assess how high the additional revenues from the IIR will be. The Federal Government estimates that the additional tax receipts will amount to between CHF 500 million and CHF 1 billion per year.
The application of the UTPR to foreign subsidiaries of Swiss companies would have led to complex UTPR procedures abroad for the corporate groups concerned. The companies concerned will be spared those administrative burdens thanks to the introduction of the IIR in Switzerland.
Decision not to introduce a UTPR
At the above-mentioned session, the Federal Council also decided that it would not introduce an UTPR in Switzerland for the time being. The UTPR is the catch-all solution for the OECD minimum tax that ensures that all companies from a multinational corporate group are subject to a minimum rate of tax of 15%.
The Federal Council took the view that in particular legal uncertainties and business location considerations should be given greater weight than the comparatively lower tax receipts.
A rethink of Swiss tax policy
The introduction of the IIR represents a rethink of Swiss tax policy. Until now, Switzerland has not taxed the foreign subsidiaries of Swiss business units if they were subject to excessively low taxation.
Global implementation status
With the introduction of global minimum taxation, the aim was to achieve a tax burden for major international groups of at least 15%. The regulations adopted by the OECD were implemented in most EU Member State in 2024.
The aim was to achieve uniform global rules on minimum taxation. So what happened?
At the moment, large countries such as the USA, India, China and Brazil have no plans to implement the rules. Further developments are anxiously awaited.
Conclusion
The aim of minimum taxation was to exert further pressure on low-tax countries. What happens now?
It looks like additional tax revenues could be generated with the introduction of the IIR and the QDMTT in Switzerland.
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