IIR International supplementary tax comes into force as of January 1st, 2025

On January 1, 2025, Switzerland will introduce the international supplementary tax IIR Income Inclusion Rule. This measure is part of the implementation of the OECD minimum tax, which targets globally operating companies.

I Background

As part of the OECD BEPS project (“Base Erosion and Profit Shifting”), over 140 countries, including Switzerland, have agreed to implement a minimum tax. This requires large multinational corporations with consolidated revenues of at least EUR 750 million to pay a minimum of 15% tax on their profits. Switzerland introduced this measure on January 1, 2024, through a national supplementary tax known as the Qualified Domestic Minimum Top-up Tax (QDMTT). This ensures that affected companies in Switzerland pay at least 15% in taxes.

II Income Inclusion Rule IIR

In addition to the national supplementary tax already in place, the Income Inclusion Rule will be introduced on January 1, 2025. This new measure is designed to ensure that foreign subsidiaries of Swiss-based multinational corporations, as well as intermediate holdings of foreign corporate groups, are also subject to the 15% minimum tax. If such a subsidiary in another country is not taxed sufficiently, the new IIR will come into effect, and Switzerland will be enabled to levy the difference. This aims to prevent the erosion of the tax base to other countries.

III Impact

The Income Inclusion Rule shields Swiss corporate groups and intermediate holdings from foreign tax rules (Undertaxed Profits Rule UTPR), especially in countries that have not implemented their own IIR. With the UTPR, a jurisdiction taxes its domestic corporate groups for any other low-taxed foreign group companies.
Since most profits taxed below 15% are already covered by the UTPR in other countries, introducing the IIR in Switzerland is unlikely to pose significant disadvantages. However, not implementing the IIR would mean missing out on important revenue that could be used to enhance Switzerland's economic position. Additionally, the IIR helps Swiss companies avoid facing extra tax procedures abroad. For now, the Federal Council has decided not to introduce the UTPR, as the risks associated with it outweigh the potential benefits in terms of tax revenue.

With the introduction of the IIR in 2025, Switzerland is addressing a gap in the global minimum tax framework. Over the next few years, it will become clear how these reforms will affect companies and Switzerland as a business hub, as well as which tax policy adjustments arise from the reduced tax competition between cantons. What is clear, however, is that the administrative burden for both companies and authorities will increase.

For further information, our RSM experts are at your disposal.

Source:
IIR international supplementary tax to come into force in 2025 (admin.ch)
https://www.efd.admin.ch/en/implementation-oecd-minimum-tax-rate-switzerland