As of: 13th of February 2025
Executive Summary
The OECD project on the taxation of the digital economy, which consists of two pillars (pillar 1: redistribution to market states; pillar 2: minimum taxation), has faced particularly significant challenges since US President Trump took office. The new president announced that the US is withdrawing from the project and that it will take countermeasures against states that impose discriminatory and extraterritorial taxes against the US (link to the decree and link to the America First Trade Policy). The Trump administration now has 60 days to develop specific countermeasures (e.g. tariffs) from the president. The focus of the countermeasures is likely to be the UTPR of the minimum taxation and so-called Digital Service Taxes of other states (link to the announcement of the Ways and Means Committee). Furthermore, President Trump announced the goal of reducing the US federal corporate tax rate to 15 per cent (see, for example, reporting on the WEF). If the announced corporate tax cut passes through the US Congress, global tax competition could flare up again instead of a global minimum tax rate.
With his announcements, President Trump is likely to have sealed the end of Pillar 1 of the project and dealt a severe blow to Pillar 2 (minimum taxation). The continued existence of the minimum tax is likely to require various technical adjustments, which will have to be addressed in the course of 2025.
The minimum tax has been implemented by most European countries (including Switzerland) and various other countries since the beginning of 2024 (link). Many particularly important economies, such as the US, China and India, have so far shown no signs of joining. The minimum tax is therefore more of a European than a global project. In view of President Trump’s threats, it seems highly unlikely that the minimum tax will be implemented globally in the next few years. However, it should not be assumed that the minimum tax will now simply disappear. In view of political and financial obstacles, it must be assumed that it will at least be continued as a European project (link to EU Parliament).
Switzerland must therefore carefully observe international developments and ensure that a balanced international playing field is established. At all costs, Switzerland must avoid being subject to stricter tax requirements than states outside Europe together with the EU, thereby allowing direct competitors such as Singapore, Dubai and many more to offer better tax conditions.
Overview
The OECD project on the taxation of the digitalised economy is based on two pillars and is intended to improve the acceptance of international corporate taxation. The work is being carried out by the OECD Secretariat. The new tax rules will be formally adopted by the ‘OECD/G20 Inclusive Framework on BEPS’ (hereinafter: IF), which comprises more than 140 countries. In October 2021, the IF countries adopted the political parameters for the two pillars. Since then, intensive work has been carried out on the technical implementing provisions. Pillar 1 involves a greater redistribution of the profits of the world’s 200 or so most successful corporations from the countries in which they are based to the countries in which they operate. Pillar 2 involves the introduction of a minimum corporate income tax of 15 per cent for all companies with a turnover of at least 750 million euros. In the case of Pillar 1, a multilateral agreement is to be submitted to the states for signing and subsequent ratification. In the case of pillar 2, implementation is not carried out by means of a multilateral agreement, but rather by uniformly implementing the so-called model rules, which have been jointly developed but individually adopted by the states. In order to achieve the most uniform global implementation possible, the model rules are accompanied by a (continuously expanding) commentary and additional new administrative guidelines published at regular intervals (so-called administrative guidance). The last corresponding publication by the OECD took place on 15 January 2025. Key information on the GloBe Information Return and its international exchange was published. Furthermore, important guidance was published for Switzerland.
Pillar 1 (Taxation in the Market States)
The very largest international corporations (a total of around 100 corporations with a turnover of more than EUR 20 billion and a profit margin of >10%) are to pay tax in the sales countries on a higher proportion of their profits. This is the intention of Pillar 1. The focus is particularly on digital corporations such as Google, Facebook and Apple, some of which pay hardly any profit tax in their sales countries. However, a large number of traditional industrial companies are also affected, which already pay high taxes in their sales countries and have group tax rates of 25.
The final Pillar 1 implementation package, together with a multilateral convention, would have to be submitted to the IF member states for approval before the end of 2024. However, for Pillar 1 to be implemented globally at all, a critical mass of states must ratify the multilateral convention. The decisive factor here is whether the US ratifies it. Half of the companies affected by Pillar 1 have their headquarters in the US, which is why the planned redistribution from the home to the market states cannot be implemented without US ratification. A 2/3 majority in the US Senate is required for ratification. Now that the US under President Trump has officially withdrawn from the work, the project is unlikely to be pushed forward for at least the next few years. If Pillar 1 is not implemented, this could give a boost to the UN’s redistribution efforts. Whether the work of the UN will also be widely supported by the industrialised countries seems uncertain at present, since the latter would have to expect a significant reduction in their revenues. The position of the USA is already clear in this regard. President Trump has announced that the USA is withdrawing from this redistribution project.
Pillar 2 (OECD Minimum Tax)
Project pillar 2 requires large companies (at least 750 million euros in revenue) to pay at least 15 per cent tax on their profits in each country in which they operate. The determination of profits is not based on the widely divergent tax regulations of the individual states, but on the international accounting standards (e.g. IFRS, US GAAP, etc.) applicable to published consolidated financial statements, since the differences between the profits of one country and another are much smaller due to the so-called ‘true and fair view principle’. In addition, the new international rules (so-called GloBE rules) provide for various adjustments, for example for investments or deferred taxes.
The minimum tax levied in accordance with the international standard for one’s own territory is referred to as the Qualified Domestic Minimum Top-up Tax (QDMTT or, in Switzerland, the so-called Swiss supplementary tax). On 15 January 2025, the OECD published the list of those states whose domestic top-up tax for the years 2024 and 2025 will be granted ‘Q-status’. The review was carried out as part of the temporary peer review.
If a state does not implement the new minimum taxation rules, the state of the parent company (by means of the Income Inclusion Rule IIR) or, subsidiarily, the states of other group companies (by means of the Undertaxed Profits Rule UTPR) should tax the difference between the effective tax rate (e.g. 13%) and the minimum tax rate (15%) reported by the company for a particular state.
If minimum taxation is to be implemented globally, it must be possible to apply the UTPR to all states (including the states in which the headquarters are located) without exception. If (i.) all subsidiaries of groups headquartered in their own country and (ii.) all group companies of foreign groups can be covered by the IIR and the UTPR, it is financially disadvantageous for states to refrain from implementing minimum taxation. Not implementing minimum taxation would at most lead to the tax difference being collected by another country. If a country wants to minimise the financial damage, it must at least introduce QDMTT. However, if the UTPR only applies to a limited extent, countries and companies can specifically restrict the territorial scope of the minimum taxation. In this way, jurisdictions that do not implement the minimum taxation can improve their attractiveness as a business location and companies can reduce their tax burden. Currently, the UTPR only applies to a very limited extent at the request of the USA (and many other countries such as China, India, etc.).
In December 2021, the Pillar 2 Model Rules were published (Link Model Rules). In mid-March 2022, the first version of the Commentary on the GloBE Model Rules was published (Link Commentary GloBE Rules). Since there are still a huge number of application questions, the Implementation Framework regularly issues new technical details, e.g. in the form of administrative guidance. However, these details also include new adaptations of the commentary, some of which even contradict the model rules published in December 2021.
Various parts of the administrative guidance were published in December 2022, February, July and December 2023, June 2024 and most recently in January 2025. Particularly important were the requirements for the transitional CbCR safe harbour, which should somewhat reduce the administrative burden on the companies concerned in the early years (2024 to 2026). In mid-July 2023, the Implementation Framework published further crucial details such as the GloBE Information Return (GIR) or various administrative guidances including two new safe harbours (QDMTT safe harbour, transitional UTPR safe harbour). The transitional UTPR safe harbour is particularly important. This safe harbour, which was adopted in particular in response to pressure from the US, includes a temporary exemption from the scope of the UTPR. In January 2025 (link), a new version of the CbC, the MCAA CbC, was published, which forms the basis for the automatic exchange of the CbC and other documents. Further key documents on the application of minimum taxation are expected in the course of 2025. Since the various states continue to differ in their opinions on politically sensitive issues, further delays are to be expected. These will also arise due to the USA breaking ranks.
Stance
The project initiated by the G20 has been struggling with major problems for some time and seems to have been left behind by events. This is evident, for example, from the fact that most countries are not implementing the minimum tax. Instead of promoting common goals, there is an increasingly fierce competition between the G20 countries to attract high-tech and other particularly profitable corporations with their research and production facilities. Their high taxes on profits should no longer be distributed ‘fairly’ globally, but should be claimed as fully as possible by the USA, for example. Nor do the states want to be restricted in the competition for business location and do not want to do without the use of particularly effective instruments such as attractive profit tax rates.
With the election of US President Trump, the global battle for the research and production locations of particularly attractive corporations has come to the fore. On 20 January 2025, US President Trump issued instructions for the US to withdraw from the OECD’s BEPS 2.0 project. His administration now has 60 days to prepare measures for the president to take countermeasures against states that apply discriminatory and extraterritorial taxes against the US (e.g. the UTPR or so-called Digital Service Taxes). President Trump’s announcements may also have sealed the end of Pillar 1 of the project. As is well known, Pillar 1 cannot be implemented without the US. President Trump also announced the goal of the US reducing its federal corporate tax rate to 15 per cent. Furthermore, the US has also withdrawn from the ongoing UN tax project.
Until the specific goals and measures of the US are known and the OECD and the EU present their plans for how to proceed with minimum taxation, there will be great uncertainty as to how international corporate tax law will develop.
In December 2022, the EU adopted the directive implementing the OECD minimum tax rate. The larger EU member states have thus committed to implementing the OECD minimum tax rate at the beginning of 2024. They have also committed to implementing the UTPR at the beginning of 2025. Meanwhile, it appears that the vast majority of EU member states are honouring their commitments.
Outside Europe, enthusiasm for the introduction of the minimum tax has largely evaporated. In any case, many states are largely holding back on announcements or consultation procedures. Currently, more than half of the members of the Inclusive Framework have still not implemented the minimum taxation. These include economic heavyweights such as China and India.
At the end of 2023, the Federal Council decided to introduce the Swiss supplementary tax at the beginning of 2024. At the same time, the Federal Council published the definitive ordinance. In September 2024, the Federal Council decided to introduce the IIR at the beginning of 2025. The reason for this was that EU member states were introducing the UTPR at the beginning of 2025, which meant that foreign subsidiaries of Swiss groups might have to pay their additional tax to EU member states. The vast majority of Swiss companies also believed that a Swiss IIR would reduce the administrative burden and eliminate the risk of double taxation by competing UTPRs in different EU member states. Due to the possibility of retaliatory measures, particularly from the US, the Federal Council also decided not to implement the UTPR at the beginning of 2025. In view of the threat of sanctions from the new US administration, the Federal Council is likely to be pleased with this decision.
According to the transitional provisions, 25 per cent of the revenue from the Swiss supplementary tax will go to the federal government. How the cantons will use any additional revenue from the surtax will be determined at a later date, depending on the amount of revenue expected and the cantonal objectives. It is unlikely that more clarity about the actual revenue from the Swiss surtax will be available until sometime in 2025. For the foreign surtax IIR, more clarity is not expected until 2026 at the earliest.
Outlook
US President Trump’s announcements that he will withdraw from the OECD digital taxation project and impose sanctions on other countries that apply discriminatory and extraterritorial taxes against the US (e.g. the UTPR or so-called Digital Service Taxes) could lead to significant changes in the OECD minimum taxation. Furthermore, Trump’s decree of 20 January is likely to mean the end of the OECD project to redistribute wealth from market states (Pillar 1). The announcement of tax cuts in the US could lead to a resumption of international tax competition. These measures could also further impair the competitiveness of European countries with high tax rates, such as Germany.
However, it is currently highly uncertain how high the announced tax cut is on President Trump’s (long) list of priorities. The at least temporary shortfall in revenue associated with such a reduction is also extremely high, which, given the high level of debt in the US and the large budget deficit, represents a financial challenge. Furthermore, US tax policy is primarily determined by Congress, with various senators apparently sceptical about an even higher US budget deficit. In view of the narrow Republican majorities, such a tax package could face major political obstacles. At the same time, the corporate tax cut from 35 to 21 per cent implemented by Trump during his first term in office has apparently paid off economically and financially for the US. This could encourage Donald Trump to push through a further cut politically.
It is also uncertain which foreign taxes will be viewed as discriminatory and extra-territorial, and what specific measures the Trump administration will take in the area of the OECD minimum tax. In addition to tariffs, various other measures are also being considered. Does the US want to completely abolish the minimum tax, or does it want special exemptions that improve its own competitiveness at the expense of (EU) states that adhere to the minimum tax (international ban on UTPR; for US corporations, US Gilti is equivalent to IIR; US R&D tax credits are minimum tax compliant)? For political and economic reasons, it must be assumed that the EU member states in particular will want to maintain the minimum tax, even if this further worsens their own competitiveness compared to the US and EU companies will gradually shift activities from crisis-ridden Europe to the economically growing US. How the OECD reacts to the demands of the USA and how other important G20 states such as China or India act will also be important.
As has been predicted for some time, the OECD minimum tax rate is likely to undergo major changes in 2025. It is, however, unlikely that the tax will simply disappear internationally. Rather, it must be expected that the EU will hold on to the project and will force small, successful states like Switzerland to also adhere to the minimum tax. Switzerland’s goal must be to prevent objectively unjustifiable disadvantages for Switzerland and protectionist advantages for other states, in order to maintain a level playing field as far as possible.
The Federal Council’s decision to introduce the Swiss supplementary tax raises a number of questions for Swiss companies regarding its application, but also important questions regarding the attractiveness of the location. Implementing the OECD minimum taxation is challenging from a legal and administrative point of view. For a number of companies, however, the locational disadvantages compared to competing locations are more important than complicated questions regarding its application.
Position
The economically successful small state of Switzerland will have to defend itself vigorously against unfair rules being adopted at the OECD’s 2025 minimum taxation review, to ensure that Switzerland is not placed at a disadvantage in favour of EU states, the US or China. In doing so, Switzerland must also ensure that it does not have to accept any competitive disadvantages compared to competitors such as Singapore. In the past, for example, the TPRM’s Safe Harbor has already been used to decide on such objectively unjustified advantages. This enables states with a nominal federal profit tax rate of at least 20 percent (Switzerland 8.5%) to grant its companies effective tax rates of less than 15 percent through tax deductions, e.g. for R&D, without other states being able to use the TPRM against it. Switzerland will therefore have to be on its guard and must not shy away from taking action against unfair rules and refusing to consent to corresponding adjustment proposals within the framework of the IF. At the same time, it should not be forgotten that minimum taxation is not in Switzerland’s interest either financially or economically. If Switzerland is to continue with minimum taxation in contrast to the USA, the rules must enable fair competition in which Switzerland has the opportunity to restore its economic attractiveness and to have the same conditions as its competitors. If other countries want to provide tax deductions for research, development, CO2 reductions and other activities, Switzerland should definitely support such efforts. If Switzerland is unable to achieve a level playing field in the international competition between locations, the resulting disadvantages will soon have a negative impact on the financial situation of the federal government and the cantons.
Under no circumstances should Switzerland rely on the abolition of the minimum tax internationally, which would make the new location measures, as already proposed by some cantons or even adopted by parliament, obsolete again soon. As soon as the corresponding OECD requirements are known, the federal government and the cantons should adapt to the new competition between locations, develop new, internationally accepted instruments and generally improve their attractiveness as a location in the area of digitisation and other areas. As US President Trump’s plans show, the international competition between locations is fiercer than ever, and the willingness of states to face up to the competition is being closely monitored by international companies. The cantons should therefore continue to develop and implement their plans for new location measures. After all, having more options to bind successful and high-taxing companies to Switzerland as a location is always better than having no such options.
Weiterführende Dokumente
3. February 2023
Joint consultation response on compliance and tax certainty aspects of global minimum tax
25. January 2023
SwissHoldings comments on OECD public consultation document: Pillar One – Amount B
16. December 2022
OECD tax millions to stay in Switzerland
14. November 2022
Statement on the Ordinance of the Federal Council on the Minimum Taxation of Large Groups of Companies
26. October 2022
EATC wants 50/50 distribution of the gross profit from the supplementary tax
28. September 2022
Council of States approves OECD minimum taxation bill
26. August 2022
OECD digital taxation project: WAK-S largely follows Federal Council proposal
23. June 2022
OECD Digital Taxation Project: Message published
11. April 2022
SwissHoldings comments on the federal decree on the implementation of the OECD/G20 project on the taxation of the digital economy
11. April 2022
Vernehmlassungsantwort zur Umsetzung des OECD/G20-Projekts zur Besteuerung der digitalen Wirtschaft
4. March 2022
SwissHoldings comments on public consultation document: Pillar One – Amount A: Draft Model Rules for Tax Base Determinations
25. January 2022
2022: Steuerpolitische Weichen richtig stellen
13. January 2022
SwissHoldings begrüsst Umsetzungsplan zum OECD-Digitalbesteuerungsprojekt
6. September 2021
OECD-Digitalbesteuerung – Unternehmen diskutieren mit Verwaltung
16. February 2021
Das OECD-Digitalbesteuerungsprojekt könnte scheitern – mit potentiell negativen Folgen für die Schweiz
16. February 2021
Das OECD-Digitalbesteuerungsprojekt könnte scheitern – mit potentiell negativen Folgen für die Schweiz
2. February 2021
Steuerpolitische Prioritäten nach Corona – Fokus auf Wirtschaftswachstum, Wettbewerbsfähigkeit und Steuereinnahmen
14. December 2020
Public Consultation on Reports on the Pillar One and Pillar Two Blueprints – Joint comments by economiesuisse and SwissHoldings
10. December 2019
OECD/G20-Projekt zur «Besteuerung der digitalisierten Wirtschaft» – neuste Entwicklungen und Anliegen von SwissHoldings
10. December 2019
OECD/G20-Projekt zur «Besteuerung der digitalisierten Wirtschaft» – neuste Entwicklungen und Anliegen von SwissHoldings
2. December 2019
Public Consultation on the Global Anti-Base Erosion Proposal (“GloBE”) under Pillar Two Joint comments by economiesuisse and SwissHoldings
12. November 2019
Public Consultation on the Secretariat Proposal for a „Unified Approach“ under Pillar One – Joint comments by economiesuisse and SwissHoldings
7. November 2019
Globale Umverteilung der Unternehmensgewinne gefährdet Schweizer Erfolgsfaktoren
