How does OECD Pillar Two minimum tax apply to Swiss multinationals?

Switzerland was among the first jurisdictions to implement the OECD/G20 Pillar Two global minimum tax rules, driven in part by the desire to collect top-up taxes domestically rather than cede that revenue to other countries.

Background The OECD Pillar Two framework, agreed by 140+ countries in 2021, establishes a global minimum effective tax rate of 15% for large multinational enterprises (MNEs). Countries that do not impose at least 15% effective tax must allow other countries to impose top-up taxes on that country's resident entities — potentially sending revenue to the US, EU, or other higher-taxing countries.

Swiss constitutional amendment In November 2023, Swiss voters approved a constitutional amendment (by 78.5% in favour) enabling the Bundesrat (Federal Council) to implement Pillar Two by ordinance. This emergency legislative path avoided the full parliamentary process to meet the 1 January 2024 implementation deadline. The implementing ordinance was published in December 2023.

What is the QDMTT? Switzerland implemented a Qualified Domestic Minimum Top-Up Tax (QDMTT). This is a domestic Swiss top-up tax that brings the effective rate on Swiss profits up to 15% where the existing federal + cantonal rate falls below this floor. The QDMTT is assessed and collected by Switzerland — rather than another country — under the 'subject to tax' rules.

Who is in scope? Groups are in scope if their global consolidated revenues exceeded EUR 750 million in at least two of the four preceding fiscal years. This threshold is deliberately high — it covers roughly 200–300 Swiss-based multinationals and foreign multinationals with significant Swiss operations, but entirely excludes Swiss SMEs and most mid-market groups.

Impact on low-tax cantons For in-scope groups, the QDMTT effectively overrides the historically low cantonal rates: - Zug (effective 11.9%): top-up required of approximately 3.1% to reach 15% - Nidwalden (12.0%): top-up of approximately 3.0% - Geneva (13.99%): top-up of approximately 1.01% - Zurich (19.7%): already above 15% — no QDMTT required - Berne (21.0%): well above 15% — no QDMTT required

Note: the effective tax rate for Pillar Two purposes is calculated under GloBE (Global Anti-Base Erosion) rules, which differ from the cantonal Gewinnsteuer rate — GloBE adjustments may result in a different rate than the headline cantonal figure.

Distribution of QDMTT revenue Switzerland's constitutional amendment provides that 75% of QDMTT revenue goes to the cantons and 25% to the Confederation. Affected cantons like Zug still receive a share of the top-up tax, partially compensating for the loss of competitive advantage.

Substance-based carve-outs Pillar Two includes important carve-outs for genuine economic substance — specifically the SBIE (Substance-Based Income Exclusion), which excludes from the GloBE tax base an amount equal to 5% of eligible payroll costs and 5% of carrying value of tangible assets. Swiss companies with genuine Swiss-based employees and assets benefit from these carve-outs, which reduce the top-up tax obligation.

Income Inclusion Rule (IIR) and UTPR In addition to the QDMTT, Switzerland also implements the Income Inclusion Rule (IIR) — allowing Swiss parent companies of low-taxed foreign subsidiaries to apply top-up taxes at the Swiss parent level. The UTPR (Undertaxed Profits Rule) applies from 2025.