The Federal Council has enacted the Swiss supplementary tax (QDMTT) with the Minimum Tax Ordinance as of 1 January 2024. The Swiss supplementary tax refers to the Pillar 2 model rules, which are directly applicable in this regard.
One assessment procedure within Switzerland:
The Swiss supplementary tax is a federal tax that is assessed and collected by the cantons. According to the Minimum Tax Ordinance, the Swiss supplementary tax should follow the principle of the “one-stop shop.” This means, among other things, the following:
- One constituent entity per MNE within Switzerland is subject to tax (either the ultimate parent entity or alternatively the economically most significant constituent entity (highest average balance sheet total of the last three annual financial statements according to the Swiss Code of Obligations (excl. participations)).
- Per MNE Group, there will be one supplementary tax assessment per supplementary tax and correspondingly only one tax bill per supplementary tax.
Distribution of the Swiss supplementary tax:
In the minimum taxation ordinance, the Federal Council has set out how the tax base is to be distributed among the various cantons in case there is a presence in various cantons.
In a first step, the Swiss supplementary tax burden of the entire MNE Group in Switzerland must be determined. This calculation is carried out according to the GloBE model rules.
If a MNE Group is liable to tax in several cantons, the supplementary tax will be allocated to the domestic constituent entities in proportion to the extent that they have caused the Swiss supplementary tax. This amount is calculated based on the under-taxation that results from the financial statements of the constituent entities. The financial statements prepared according to the GloBE model rules serve as the basis. If no allocation is possible, the amount of the Swiss supplementary tax will be allocated according to the profits of the constituent entities.
If a constituent entity that has contributed to the levying of the Swiss supplementary tax has permanent establishments in one or more other cantons, the Swiss supplementary tax will be distributed among the individual permanent establishments according to the principles of the prohibition of inter-cantonal double taxation.
In the case of a joint venture or a minority-owned business unit, the tax liability for Swiss supplementary tax is borne by its ultimate constituent entity in Switzerland.
Consequences for taxpayers:
Due to the one-stop shop, only one business unit within Switzerland is liable for the Swiss supplementary tax. This business unit will also receive the corresponding tax bill from the competent tax administration. Nevertheless, the supplementary tax expense must be allocated to the individual affected constituent entities according to the principles outlined above. If a constituent entity assumes supplementary tax that it did not cause, the constituent entity that caused the tax must reimburse it. The explanations of the Federal Council to the Minimum Tax Ordinance explicitly state that a waiver of corresponding recharges within the MNE Group could lead to hidden dividends, which could be subject to withholding tax. This allocation should also be reflected in the statutory financial statements. In this regard, the reporting processes must be prepared accordingly with regard to the financial statements.
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