Switzerland begins a pillar two consultation

Switzerland this week launches consultation on draft legislation to implement the OECD's global minimum tax rate.

The most recent nation to release a draft law on pillar two is Switzerland, and according to sources, businesses should carefully analyze the Swiss version because the revisions will have an influence on local taxes.

On Wednesday, August 17, the Swiss Federal Council began receiving comments on the ordinance that would implement the OECD's worldwide anti-base erosion guidelines and qualified local minimum top-up tax.

The ordinance uses a supplementary tax to temporarily establish municipal minimum taxation in Switzerland. The division of the tax between each canton is outlined in the ordinance. Procedural rules, however, are still being created, and a consultation is scheduled to take place soon.

According to the finance ministers of Switzerland, the proposed legislation is the most secure way for their country to maintain its competitiveness in the event that the rest of the world adopts pillar two.

Large corporate taxpayers should carefully review the Swiss legislation regarding pillar two because numerous businesses may lose their local tax advantages under the new framework.

It may be costly to overlook important legal elements in China and Switzerland, among other nations with local incentives that are sensitive to pillar two, according to advisors.

The Swiss government stated in its draft that the choice to enact its suggested laws will be based on how far other nations' implementation has advanced.

According to the head of tax at a Swiss investment management firm, Switzerland will not likely follow the minimum tax requirements either if the international agreement to implement pillar two collapses.

The most significant obstacle that could prevent international legislators from adopting pillar two so far is the discrepancy between the corporation alternative minimum tax of the US Inflation Reduction Act and the OECD's pillar two standards.

The consultation's final day for submission of opinions is November 17. By January 2024, according to the Swiss Federal Council, its version of pillar two regulations will be in effect.

By fLEXI tEAM