Switzerland: Guidance on application of Pillar Two side-by-side package

The Federal Tax Administration (FTA) on April 7, 2026, released the following official statements regarding application of the OECD Pillar Two side-by-side package in Switzerland:

• Communication-031-E-2026-e: The five safe harbor rules under the Pillar Two side-by-side package may be applied in Switzerland, provided the relevant conditions are met, as of the following dates:
  • Extension of the transitional country-by-country (CbC) reporting safe harbor may be applied to fiscal years beginning no later than December 31, 2027, and ending no later than June 30, 2029.
  • Substance-based tax incentive safe harbor may be applied to fiscal years beginning on or after January 1, 2026.
  • Side-by-side safe harbor may be applied at the earliest to fiscal years beginning on or after January 1, 2026.
  • Ultimate parent entity (UPE) safe harbor may be applied to fiscal years beginning on or after January 1, 2026.
  • Simplified effective tax rate (ETR) safe harbor may be applied to fiscal years beginning on or after December 31, 2025.
• Communication-030-E-2026-e: The administrative guidance on Article 9.1 of the global anti-base erosion (GloBE) model rules that governs how the transitional rules of Article 9.1 are to be applied to deferred tax assets (DTAs) arising after November 30, 2021, and stipulates that the deferred tax expense arising from the reversal of such DTAs must be excluded from the ETR calculation (subject to a time-limited and amount-limited exception—Grace Period or Grace Period Limitation, respectively), must be applied in Switzerland unless the Federal Council adopts a possible amendment to the Pillar Two rules providing that such administrative guidance only applies to DTAs arising from January 1, 2025, which the Federal Council is considering via National Council motion 25.4392 and Council of States motion 25.4399. Until then, constituent entities subject to top-up tax must complete the relevant top-up tax returns in accordance with the administrative guidance (including the Grace Period Limitation) and file them within the current deadline. Such constituent entities need to indicate in the remarks on the relevant tax return that their ETR has been reduced as a result of the application of the administrative guidance (in particular the cap imposed by the Grace Period Limitation), and the cantonal tax authorities will not issue final tax assessments for the cases concerned until the Federal Council has made its decision.

For more information, contact a KPMG tax professional in Switzerland:

Olivier Eichenberger | oeichenberger@kpmg.com