• Anne Marie Anselmi, Partner |
  • Marco Lavaroni, Senior Manager |

While both the February and July AG provide for flexibility in the design of the QDMTTs, the July AG also introduces a (permanent) QDMTT safe harbor rule. This permits entities applying a qualified QDMTT in one jurisdiction to not perform GloBE calculations in other jurisdictions. This blog addresses these rules from a Swiss perspective.


On 18 June 2023, the Swiss people voted in favor of implementing the global minimum tax framework (BEPS Pillar Two) agreed by the OECD/G20 Inclusive Framework. 

In this blog series our experts are highlighting practical application issues Swiss MNE groups should think about to manage and optimize future top-up tax consequences.

In this blog we address the Administrative Guidance (“AG”) issued in February and July 2023 with respect to the Qualified Domestic Minimum Top-up Tax (“QDMTT”) – and the related safe harbor rule – from a Swiss standpoint.

What does the GloBE AG say on the design and implementation on the QDMTT?

The February AG provides jurisdictions with a degree of flexibility in how their QDMTTs are designed with the option to modify and omit certain GloBE rule provisions, if such variations do not lead to outcomes that are inconsistent with the GloBE rules.

The July AG further allows QDMTT jurisdictions to opt for certain variations from the GloBE rules (e.g., no application of QDMTT on certain types of entities, different options to allocate QDMTT liabilities between local entities). The guidance also allows QDMTT jurisdictions to design their own local QDMTT information return that follows different formats compared to the GloBE Information Return (“GIR”), provided that equivalent data points are used. 

So, can jurisdictions simply design some new tax rules which ensure that the minimum taxation of 15% in consideration of the GloBE rules are achieved? The July AG confirms this in principle, arguing that due to the credit mechanism of the QDMTT, if the rules do not effectively apply, any shortfall in the QDMTT would be picked up in other jurisdictions through the Income Inclusion Rule (IIR) or Undertaxed Payment Rule (UTPR). 

If this sounds too simple to be true, it is. And this is where the QDMTT safe harbor rule comes into play.

How does the QDMTT safe harbor rule fit into all?

Under the elective QDMTT safe harbor rule introduced in the July AG, the GloBE Top-up Tax is deemed to be zero for jurisdictions that apply a QDMTT that reaches the qualified status under the OECD peer review. For this, three additional standards need to be met: 

  • The QDMTT accounting standard requiring the QDMTT to be computed based on the UPE’s Financial Accounting Standard or, in certain circumstances, a Local Financial Accounting Standard.
  • The consistency standard effectively requiring the QDMTT rules to closely mirror the GlobE rules.
  • The administration standard requiring QDMTT jurisdictions to meet on-going monitoring process.

So, while the AG may principally allow a lot of flexibility in the design in the QDMTT, in reality, most QDMTTs are expected to closely mirror the GloBE rules to achieve the qualified status. As a result – and in contrast to the transitional safe harbor rules introduced in the December 2022 AG – while this safe harbor rule clearly results in some administrative simplification, it will not save groups from going through the exercise of enabling themselves to perform full GloBE calculations. 

What is the Swiss perspective and how is this relevant for Swiss MNE Groups?

Based on the draft ordinance, the Swiss QDMTT (“Nationale Ergänzungssteuer”) is calculated in accordance with Art. 5.1-5.6 of the GloBE rules and any special provisions of the GloBE rules in this respect shall also apply by analogy.

On this basis, it would be expected that the Swiss QDMTT will reach the qualified status under the QDMTT safe harbor rule such that – if applied – the GloBE top-up tax in jurisdictions outside of Switzerland is deemed to be zero for the Swiss entities, without a detailed calculation having to be performed in jurisdictions outside of Switzerland. For the Swiss QDMTT a detailed calculation would, however still be needed, as described further above.

With respect to the QDMTT accounting standard rule set out above, the question is if this may even be the case where Swiss entities use Swiss GAAP FER – or if not materially different even Swiss statutory accounts – to calculate the QDMTT?

Based on the July AG this would in principle be permissible in situations where the constituent entities maintain their financial accounts using an accounting standard that is different from the UPE’s Financial Accounting Standard and it is not reasonably practicable to accurately calculate their Financial Accounting Net Income or Loss in conformity with the UPE’s Standard. However, at least based on the report accompanying the draft ordinance, the Federal Council does not recommend introducing such a rule. But as this may still be introduced in the final draft of the ordinance, careful analysis of the potential benefits of using a local accounting standard and the potential risk of not applying a qualified QDMTT needs to be made. 

For this reason, companies are well advised to closely monitor the next steps taken by the Swiss government.

Key questions and next steps

In our view, Swiss MNE groups should: 

  • Closely monitor the qualified status of the QDMTT and, in general, the legislative process in Switzerland, particularly considering the three additional standards of the peer review, relevant for the safe harbor application. 
  • Continue to prepare to be able to perform full GloBE calculations for Switzerland from 2024, unless the other (transitional) safe harbor rules can be met.
  • Analyze their QDMTT safe harbor situation, particularly with respect to the impact of different applicable accounting standards.

It is strongly recommended to seek advice on Pillar Two and the related tax accounting issues to find appropriate solutions.

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