Updates

The OECD/G20 project on the taxation of the digital economy comprises a profit redistribution mechanism (Pillar 1) and the introduction of a global minimum tax of 15% for large corporations (Pillar 2). Whilst Pillar 1 remains stalled, Pillar 2 – the global minimum tax – has already been implemented by various countries, including Switzerland. In January 2026, the OECD published the so-called Side-by-Side Package, which effectively exempts US companies from the OECD minimum tax through the recognition of the American system. Among other things, the package also includes OECD-compliant tax relief on labour costs and investments. Swiss Holdings is committed to ensuring that Switzerland takes measures as quickly as possible to make use of the new opportunities to strengthen its own attractiveness as a business location.

Contents

The OECD project on the taxation of the digital economy aims to im-prove the acceptance of international corporate taxation. The project is being driven forward as part of the “OECD/G20 Inclusive Framework on BEPS” (hereinafter: IF), which comprises over 140 countries. It consists of two pillars. Pillar 1 involves a greater redistribution of profits from the world’s 200 most successful corporations from their home countries to the countries where they operate. Pillar 2 involves the introduction of a minimum profit tax of 15 percent for all corporations with a turnover of at least EUR 750 million.

State

The implementation of Pillar 1 has not yet progressed beyond work at the OECD level. Pillar 2, the global minimum tax, has been implemented in whole or in part by more than 60 countries, including the EU and Switzerland. However, the majority of IF member states have still not implemented any of the three minimum tax elements (QDMTT, IIR, and UTPR). These include economic heavyweights such as the US, China, and India.

In January 2025, the US demanded that US tax law be considered equivalent to the OECD minimum tax and that US tax law should coexist with it in the form of a side-by-side system. Under political pressure from the US, the G7 countries agreed in a joint statement (link to G7 statement) to implement the side-by-side system (SbS system).

In January 2026, the OECD published the side-by-side package, which was approved by all IF countries and will apply from the 2026 financial year. This includes the SbS Safe Harbor, the exemption from OECD minimum taxation demanded by the US. It is possible that other countries, such as Brazil, China, and possibly India, will seek to meet the requirements for the SbS Safe Harbor in the future and benefit from its advantages. In addition to the SbS Safe Harbor, the package contains further adjustments:

• Ultimate Parent Entity (UPE) Safe Harbor: This provides for an exemption from the application of the UTPR in the country of the parent company and could be attractive for large countries (e.g., India) that have not yet introduced minimum taxation and have many corporations that are primarily active domestically and in other non-minimum taxation countries.
• Simplified ETR Safe Harbor: This includes simplifications in the calculation of the complicated minimum tax calculation requirements. The OECD also intends to develop further simplifications.
• Transitional CbCR Safe Harbor: This existing safe harbor, which is already used by many corporations, provides for simplified calculations and may now be used for another year (2027).
• Substance-based Tax Incentive Safe Harbor: Finally, the SbS package gives countries the option of providing tax deductions that comply with the minimum tax. Specifically, companies may fall below the minimum tax threshold by either 5.5% of their total wage costs in a country or 5.5% of their depreciation on property, plant, and equipment (or 1% of their property, plant, and equipment holdings) in a country. These new substance-based tax incentives thus allow companies with substance (personnel, property, plant, and equipment) to benefit from significant tax relief depending on their situation and to promote the creation and preservation of skilled jobs in particular (e.g., in the areas of R&D&I, DEMPE, high-value production, etc.). However, states must provide for the new deductions in their domestic law. If this is the case, then taxation of less than 15 percent does not violate the minimum tax.

Finally, the SbS package includes the announcement of a stocktake for 2029, the implementation of new peer reviews, and the reinforcement of the importance of QDMTTs. It is clearly stated that discriminatory and conditional supplementary taxes imposed by other countries do not have to be recognized as so-called covered taxes.

Outlook

In the course of 2026, the IF is expected to adopt further important guidelines:

• Safe harbor implementation tool: This will enable significant changes to be decided without adjustments to the model rules, allowing the EU to refrain from amending its minimum tax directive. Amendments to the directive must be decided unanimously by the 27 EU member states, which is politically difficult to achieve.
• Simplifications of the Simplified ETR Safe Harbor
• Simplification of the GloBE Information Return (GIR)
• Guidance on related benefits: This is intended to establish the rules under which countries may grant subsidies, refundable tax credits (QRTCs), and other benefits to companies, in particular those affected by the minimum tax.
• Rules for dispute resolution
• Rules for conducting comprehensive peer reviews will be established.

At the same time, various countries are likely to undertake legislative projects to transpose the SbS package into national law. Numerous countries will examine in detail whether and how they can improve their attractiveness as a location thanks to the new substance-based tax incentives.

Position

The OECD minimum tax, combined with the strong Swiss franc, poses enormous challenges for Switzerland as a business location and requires an urgent, targeted advancement of its business location policy. At the same time, the OECD minimum tax is an international reality to which Switzerland must adapt in the long term. A withdrawal by Switzerland is therefore not the right approach. Instead, the federal government and the cantons should leverage the opportunities offered by the SbS package as quickly and effectively as possible to strengthen Switzerland’s competitiveness in the long term.

Switzerland’s goal should be to specifically strengthen and further expand its appeal for research, development, and innovation activities. Particular emphasis should be placed on the country’s appeal for IP (patents, trademark rights, etc.) as well as for value-added-intensive and thus fiscally lucrative decision-making functions. The goal must be to increasingly attract promising business projects back to Switzerland.

Switzerland is called upon to strengthen its competitiveness and secure attractive tax revenues in the long term in a targeted manner by boldly and swiftly pursuing new approaches. In this context, the consistent use of OECD-compliant instruments such as substance-based tax incentives is of central importance. Likewise, the Qualified Refundable Tax Credits (QRTC), which are explicitly provided for under the OECD minimum tax and are already being successfully used by other locations such as Singapore, should be examined.