The OECD Minimum Tax: What Swiss Businesses Need to Know About the 15% Global Tax Floor

The global tax landscape shifted dramatically when Switzerland joined over 140 countries in implementing the OECD minimum tax—a 15% floor ensuring multinational enterprises pay minimum tax wherever they operate. For large multinationals, this represents the most significant change to international tax rules in decades.

This article examines what the OECD minimum tax means for Swiss businesses, how Switzerland implemented it following a 2023 referendum, which companies are affected, and what the future holds after the US withdrawal.

What is the OECD minimum tax and why was it created?

The OECD minimum tax is a global agreement ensuring multinational enterprises pay at least 15% tax in every jurisdiction they operate. It was created to combat base erosion and profit shifting (BEPS) and end “the race to the bottom” in corporate taxation.

The initiative emerged from years of mounting international pressure to address tax avoidance by large multinationals. According to the OECD, BEPS practices cost countries between $100-240 billion in lost revenue annually, equivalent to 4-10% of global corporate income tax revenue. These losses particularly harm developing countries that rely more heavily on corporate tax revenues.

In October 2021, approximately 140 countries within the OECD/G20 Inclusive Framework agreed to implement a global minimum tax (“Pillar Two”) establishing a 15% floor for multinational groups with consolidated revenues of at least €750 million. The goal is straightforward: ensure these companies pay a fair share of tax wherever they generate profits, eliminating incentives to shift profits to tax havens.

Switzerland implemented the minimum tax primarily to protect domestic tax revenue. Without its own domestic rules, foreign countries could collect top-up taxes on Swiss companies through the Income Inclusion Rule (IIR) or Undertaxed Profits Rule (UTPR) mechanisms (see the section below for additional details on these mechanisms).

How does the OECD minimum tax actually work?

The minimum tax operates through three main mechanisms: the Qualified Domestic Minimum Top-up Tax (QDMTT) allows countries to collect top-up tax domestically, the Income Inclusion Rule (IIR) taxes low-taxed foreign profits of subsidiaries, and the Undertaxed Profits Rule (UTPR) acts as a backstop when other rules don’t apply.

The QDMTT is Switzerland’s domestic implementation. If a Swiss entity’s effective tax rate falls below 15%, Switzerland collects a supplementary tax to reach that minimum. This top-up tax works alongside Switzerland’s existing corporate tax system, which combines federal, cantonal, and municipal taxes, ensuring the additional revenue stays in Switzerland rather than flowing to foreign jurisdictions.

The IIR allows Swiss tax authorities to collect top-up tax from Swiss parent companies when their foreign subsidiaries are undertaxed. For example, if a Swiss parent company has a subsidiary in another country that pays less than 15% effective tax, and that country hasn’t implemented its own QDMTT, Switzerland can tax the Swiss parent on those undertaxed foreign profits to bring the effective rate up to 15%. Switzerland introduced the IIR on January 1, 2025, after implementing the QDMTT in 2024.

The UTPR acts as a last resort: if a company’s profits escape taxation under both QDMTT and IIR, countries can limit that company’s tax deductions to make up for the gap in taxes. Switzerland has postponed UTPR implementation indefinitely, monitoring international developments before deciding whether to adopt this more extreme measure.

Each jurisdiction calculates effective tax rates on a country-by-country basis using the OECD’s GloBE (Global Anti-Base Erosion) Model Rules, ensuring consistent application worldwide.

Why did Switzerland implement the OECD minimum tax?

Switzerland implemented the minimum tax to secure additional tax revenue domestically rather than losing it to foreign jurisdictions, which could have collected top-up taxes on Swiss companies if Switzerland hadn’t acted first.

The Swiss government argued that if Switzerland didn’t collect the top-up tax, foreign jurisdictions would take it instead. On June 18, 2023, Swiss voters overwhelmingly approved a constitutional amendment enabling implementation, with 78.5% voting in favor and all 26 cantons supporting the measure.

Switzerland’s decision wasn’t just about revenue protection though, it was also about maintaining credibility and competitiveness in international business. Failing to implement the rules would have exposed Swiss companies to additional taxation abroad, creating legal uncertainties and administrative burdens that could drive businesses away.

Which Swiss companies are affected by the minimum tax?

The minimum tax applies to multinational groups with consolidated annual revenues of €750 million in at least two out of the last four years. According to the Federal Council, a few hundred Swiss-headquartered groups and a few thousand Swiss subsidiaries of foreign groups fall within scope.

The OECD minimum tax specifically targets large multinationals with cross-border operations where profit-shifting opportunities exist. Companies operating exclusively within Switzerland are exempt, regardless of size. This means the vast majority of Swiss SMEs are not directly subject to the OECD minimum tax compliance requirements. However, SMEs may be indirectly affected by cantonal responses to the new framework, as some cantons have raised their standard corporate tax rates to align more closely with the 15% threshold.

The cantons most impacted are those with historically low corporate tax rates where large and profitable multinational companies are also located; including Zug, Lucerne, Nidwalden, Basel-Stadt, Geneva, and Vaud (the latter two have increased their tax rates to bring them closer to the effective rate of 15%). Companies that are part of an in-scope multinational group and taxed below 15% in a canton may face a domestic top-up to reach the minimum 15% effective tax (provided the group meets the €750m revenue threshold).

For example, a company in Zug paying an 11.85% effective rate would owe an additional 3.15% in supplementary tax. The sectors most affected include pharmaceuticals, technology, commodity trading, and financial services (industries with significant presence in low-tax Swiss locations).

How has Switzerland implemented the minimum tax?

Switzerland implemented the minimum tax in two stages: the domestic top-up tax (QDMTT) took effect on January 1, 2024, followed by the international top-up tax (IIR) on January 1, 2025. The undertaxed profits rule (UTPR) has been postponed indefinitely pending international developments.

Following the June 2023 referendum, the Federal Council enacted the Minimum Taxation Ordinance (Mindestbesteuerungsverordnung) in December 2023. The OECD Model Rules formed the technical foundation, ensuring that Switzerland’s rules align with international standards and should be recognized globally as OECD-compliant.

The phased implementation gave companies time to prepare systems and processes. The QDMTT implementation in 2024 focused on domestic under-taxation, while the 2025 IIR rollout extended coverage to foreign subsidiaries of Swiss groups. The Federal Council postponed UTPR implementation as other major countries have also not adopted the full framework.

A key development came with the January 2025 launch of OMTax, a web-based platform integrated into the Federal Tax Administration’s ePortal. This system handles mandatory electronic registration and reporting for affected groups. Companies must identify their responsible Swiss constituent entity and file returns through this platform in German, French, Italian, or English.

How is the additional tax revenue distributed in Switzerland?

The federal government receives 25% of additional minimum tax revenue, while cantons receive 75%. The allocation mechanism aims to balance national interests with cantonal autonomy.

QDMTT revenue flows to the canton where the under-taxation occurs (i.e., the canton in which the Swiss entity paying below 15% is located). IIR revenue goes to the canton of the ultimate Swiss parent entity.

The Federal Council initially estimated additional annual revenue of CHF 1-2.5 billion in the first years; however, the 2024 top-up tax revenue fell significantly short. A Deloitte Switzerland study analyzing the 50 largest listed Swiss groups found actual 2024 top-up taxes payable in Switzerland likely below CHF 200 million (just 8-20% of projections).

Several factors explain the revenue shortfall. Many Swiss multinationals already maintain effective tax rates above 15% through ordinary operations, meaning they owe no top-up tax. Temporary safe harbors also provide relief. These allow qualifying companies to avoid complex GloBE calculations through 2026 if they meet simplified tests, and thereby avoid paying top-up taxes even if they theoretically should.

Revenue may increase post-2026 when safe harbors expire and companies must perform full calculations. Additionally, Switzerland’s 2025 IIR implementation enables collection of top-up tax on foreign subsidiaries in countries without their own QDMTT.

What is the impact on Swiss tax competition and cantonal attractiveness?

The minimum tax fundamentally alters inter-cantonal tax competition for large multinationals, particularly affecting low-tax cantons like Zug and Lucerne, while initiating new strategies including subsidies, tax rate adjustments, and location promotion measures.

For decades, cantons competed aggressively on corporate tax rates. Choosing the right canton has long been a critical decision for businesses, with Zug’s 11.85% rate, almost half of Bern’s 20.54%, attracting numerous multinational headquarters. The minimum tax eliminates much of this competitive advantage for affected companies—if they must pay 15% regardless, the base cantonal rate becomes less critical.

Low-tax cantons initially considered countermeasures. Zug proposed a 3% additional cantonal tax on profits exceeding CHF 20 million, arguing that revenue collected cantonally stays entirely with Zug rather than sharing with the federal government. After political debate, this proposal was withdrawn in March 2025, highlighting the complexity of cantonal responses.

Other cantons took different approaches. Vaud, Geneva, Neuchâtel, and Schaffhausen raised their maximum corporate tax rates closer to 15%, accepting the new reality. Tax competition between cantons hasn’t ended though, it’s evolved. Some cantons have turned their focus on location promotion measures such as qualified refundable tax credits, R&D subsidies, and innovation support. Several cantons including Basel-Stadt, Grisons, Lucerne, and Zug are examining or implementing these frameworks to maintain their attractiveness.

Additionally, personal income tax competition has intensified as cantons use minimum tax proceeds to reduce rates for high earners, maintaining appeal for executives and entrepreneurs.

What challenges has the global implementation faced?

Global implementation has been severely undermined by the US withdrawal in January 2025 under President Trump, along with non-participation by major economies including China and India, leaving primarily EU countries implementing the rules.

On his first day in office, President Trump issued an executive order declaring the OECD minimum tax has no force in the US. Congressional Republicans had never supported the framework, viewing it as European overreach. The US already maintains its own minimum tax through GILTI (Global Intangible Low-Taxed Income), though calculated differently using global averaging rather than country-by-country assessment, and at 10.5% (rising to 13.125% in 2026) rather than 15%.

In June 2025, G7 finance ministers reached a compromise: the US secured exemptions for American multinationals from the UTPR, while agreeing to support strict implementation for other countries. This arrangement allows the framework to continue but gives US companies a competitive advantage.

China and India, both representing massive economies, have not implemented Pillar Two rules. Overall, approximately 50 jurisdictions have enacted some form of Pillar Two legislation, far fewer than the 140+ that originally agreed. The EU accounts for most implementers, with only a handful of non-EU countries including the UK, Japan, South Korea, Australia, and Switzerland adopting the rules.

What does the future hold for the OECD minimum tax?

The OECD minimum tax faces an uncertain future due to US non-participation and fragmentation of global consensus, though Switzerland remains committed to its implementation to protect tax revenues and maintain its competitive position.

Switzerland postponed UTPR implementation as major economies like the US and China haven’t adopted it. The US carve-out from UTPR under the June 2025 G7 agreement gives American multinationals competitive advantages, which may pressure other countries to seek similar exemptions. Without participation from the US, China, and India, achieving true global consistency is difficult.

Countries may return to digital services taxes (DSTs). Pillar One was supposed to replace these unilateral measures, but with its implementation stalled, countries may return to discriminatory taxes on tech giants, potentially triggering trade disputes.

Switzerland’s approach involves maintaining current implementation while preserving flexibility. Cantons continue developing strategies to support affected companies through subsidies and other location promotion measures, while the federal government balances international cooperation with protecting Swiss business interests in a fragmented global tax landscape.

What does the OECD minimum tax mean for your business?

The OECD minimum tax represents a fundamental shift in international taxation, creating new compliance obligations for large multinationals while leaving SMEs largely unaffected by direct compliance requirements. For Swiss businesses operating across borders, understanding these rules and their practical implications is essential for strategic tax planning.

While most Swiss SMEs are not subject to the OECD minimum tax itself, they may be indirectly affected by cantonal responses to the new framework. Some cantons have adjusted their standard corporate tax rates or implemented new location promotion measures in response to the minimum tax, which can impact all businesses regardless of size. Understanding how your canton is responding to these changes is important for all Swiss companies.

Large multinational groups face significant complexity. Determining whether your company is in scope, calculating effective tax rates country-by-country, and meeting new reporting requirements through the OMTax platform all require specialist expertise.