New Global Tax Agreement / International Taxation / Global Minimum Tax Rate
After the Inclusive Framework of the OECD named the initial key parameters in July 2021 on taxing the digital economy and global minimum taxation, the OECD / G20 Inclusive Framework did now issue at the beginning of October 2021 a statement revealing more details and implementation steps.
According to the Pillar One of the framework part of profits of the biggest multinational enterprises (MNEs) will be partially allocated to market jurisdictions, i.e. where goods and services of the MNEs are used or consumed (Profit Shifting Avoidance).
According to the Pillar Two of the framework the minimum tax rate of bigger MNEs shall be 15%. (Avoidance of low or un-taxed income).
The multilateral convention will provide for the abolishment of any unilateral digital taxes.
Timing: The intention is that OECD / G20 countries will sign the multilateral convention during 2022, to be effective in 2023. Based on domestic legislative procedure, the implementation in Switzerland is not to be expected before 2024.
How Switzerland is affected: The effective corporate tax rates in 18 Swiss Cantons are lower than 15%, in 8 Cantons they are higher. To avoid top-up taxation of Swiss profits by other jurisdictions, Switzerland must urgently amend its tax legislation and should inter alia implement a group taxation scheme not only on national, but also on international level.