The OECD's Base Erosion and Profit Shifting (BEPS) 2.0 initiative represents a significant change in global tax standards. Its goal is to combat tax avoidance by multinational corporations and ensure that they pay taxes where they earn profits.
BEPS 2.0 consists of two pillars that focus on different aspects of taxation.
Scenario planning: Responding to new BEPS proposals– built on KPMG Digital Gateway
Pillar 1 focuses on the redistribution of taxing rights - apart from the standardization of profit margins. Countries with large consumer markets should have the right to tax the profits of large multinationals, even if they are not physically present in those countries. This will ensure that digital and global companies are taxed fairly. However, countries have not yet been able to reach a final agreement on its introduction.
Pillar 2 introduces a global minimum tax rate of 15%. This global minimum tax is intended to prevent multinational corporations from shifting profits to low-tax jurisdictions. This regulation mainly affects groups with an annual turnover of more than EUR 750 million and has also been implemented in Switzerland from 2024. Its application will be extended from 2025.
Companies below this threshold should nevertheless review their ownership structure as they may be part of a larger consolidated group (e.g. family office, foundation). The global minimum taxation will have a lasting impact on the tax strategy of multinational groups.
The introduction of Pillar 2 will have a significant impact on the Swiss tax system.
Traditionally characterized by attractive corporate tax rates, Switzerland now faces the challenge of implementing the new global minimum tax standard. This development marks an important step towards alignment with international tax law, which aims to promote fair and transparent tax practices worldwide.
The Swiss authorities are actively working to assess the impact of the Pillar 2 rules and to ensure that Switzerland remains competitive while meeting international requirements. The Swiss tax system needs to be harmonized with the changes in international tax law to meet the new requirements. Some cantons are also introducing new incentive systems.
Companies need to be prepared for a possible adjustment of profit tax rates and incentive possibilities, which will affect both local and international companies.
The adaptation to Pillar 2 poses a number of challenges for Switzerland and for the companies.
The specific challenges for companies are as follows:
Pillar 2 applies to multinational companies in all sectors, including technology, pharmaceuticals and consumer goods, that meet the size criteria.
Companies with extensive international operations will need to reassess their tax strategies to comply with the new requirements. Compliance and reporting requirements will require adjustments to accounting and IT systems. In addition, increased tax burdens may affect companies that previously benefited from lower tax rates.
Companies will also need to ensure that they improve their governance framework to meet the new legal requirements.
Switzerland has already taken significant steps to meet the OECD timetable for the introduction of a global minimum tax.
The Pillar 2 concept is supported by more than 100 countries worldwide. By 2024, around 35 countries (in particular most of the EU countries) will have introduced at least one of the corresponding minimum taxation rules. Others, such as Hong Kong and Singapore, will follow by 2025 (about 50 countries in total; information as of September 2024).
An overview of the current implementation status can be found here.
While some key countries, such as the US and the BRIC countries, have not yet decided on implementation steps, most companies will be affected by the new rules in at least one country from 2024 or 2025 at the latest. Companies will therefore need to adapt their systems and procedures by 2024 (or 2025), with the first Pillar 2 tax return expected to be due in mid-2026.
Under Pillar 2, Swiss companies will need to manage many data points to comply with the new rules. Approximately 150 different data points need to be collected, including information on taxes, income and internal structures.
Companies are faced with the decision to either develop their own calculation system, license external software solutions, or outsource the calculation. Preparation for these new compliance requirements can be supported by workshops and advisory services to identify the relevant data in existing systems.
KPMG has a proven mapping approach that can be used to map the GloBE rules to the data available in your organization. We offer a one-day discovery workshop to help you identify the relevant data in your systems and data landscape.
Our step-by-step project approach will help you prepare for the requirements of Pillar 2, no matter what stage of implementation you are in.
With the introduction of Pillar 2 of BEPS 2.0, Switzerland is facing far-reaching changes. The country's ability to adapt will be crucial to maintaining its competitiveness as a business location. A fair and internationally harmonized tax system will not only strengthen Switzerland's reputation as a responsible country but will also promote a sustainable tax landscape in the long term.
To successfully address these challenges, a continuous dialog between business, government and international stakeholders is needed. Companies should be proactive not only to ensure compliance, but also to optimize their strategic positioning in the new global tax environment.
Our team of experts is experienced in guiding groups through the implementation process. We’re ready to support your Pillar Two project through an approach that:
