Pillar Two in Switzerland: the global minimum tax

What Pillar Two is, in one pass

Pillar Two sets a floor under the effective tax rate of large multinational groups, country by country. The technical rules are the GloBE rules, short for Global Anti-Base Erosion, agreed by the OECD/G20 Inclusive Framework and adopted by most of the jurisdictions a Swiss group trades with. They apply to a multinational enterprise group whose consolidated annual revenue reaches EUR 750 million in at least two of the four preceding financial years, the same line that already triggers country-by-country reporting.

The mechanism is a top-up. For each country, the group computes a GloBE effective rate on a defined income base, and where that rate falls below 15%, a top-up tax lifts it to the floor. What Pillar Two reads is the rate the group actually paid once the GloBE adjustments are made, which can sit well below the headline statute rate. A canton with a 12% effective rate produces a shortfall the rules will collect somewhere.

Three charging rules decide who collects that shortfall, in a fixed order. A qualified domestic minimum top-up tax (QDMTT) lets the source country take it first. An income inclusion rule (IIR) lets the parent's country take what the QDMTT did not. An undertaxed profits rule (UTPR) is the backstop, reallocating anything still untaxed across the other countries where the group operates. Switzerland has the first two in force and holds the third in reserve.

What Switzerland implemented, and when

Switzerland implemented Pillar Two in stages, starting from a popular vote. A minimum-tax provision had to be added to the Federal Constitution first, and on 18 June 2023 the electorate approved it with roughly 78.5% support. Because a full federal act takes years, Parliament authorised the Federal Council to bring the rules into force by a temporary ordinance, the Minimum Tax Ordinance, until that act is in place. The ordinance is the legal basis the tax administration is working under today.

The QDMTT came first. Switzerland's domestic top-up tax has applied since 1 January 2024, so the country collects the top-up on its own low-taxed profits rather than ceding it abroad. The IIR followed. On 4 September 2024 the Federal Council decided to bring the income inclusion rule into force from 1 January 2025, extending Swiss taxing rights to the low-taxed foreign profits of Swiss-headed groups. The reason was defensive: had Switzerland not acted, other states would have reached those same profits through their own UTPR from 2025.

The UTPR is the piece Switzerland chose not to switch on. In the same September 2024 decision the Federal Council declined to bring it into force for the time being, judging the risks greater than the revenue. It is not abolished, only held in reserve, available to be activated by ordinance or by the eventual federal act if the calculus changes.

The wider corporate tax picture this sits on top of — the federal 8.5%, the cantonal spread, participation relief, the patent box — is set out in our guide to corporate tax in Switzerland.

Who is in scope, and who is not

Scope turns on a single number: EUR 750 million of consolidated annual revenue, reached in at least two of the four financial years before the year tested. The figure is read from the group's consolidated accounts, so a Swiss subsidiary of a large foreign group is in scope through the size of the whole group rather than its own turnover. A standalone Swiss company below the line is outside Pillar Two entirely.

That cut-off matters because the great majority of Swiss companies sit well under it. For a domestic SME, a family holding, or a single Swiss operating company, nothing about Pillar Two changes the tax return. The rules reach a defined population of large, mostly cross-border groups, and the substance pressure below is felt by them.

Within an in-scope group, the calculation is done per country, which is why a single low-taxed Swiss entity, such as a financing company, a holding or an IP vehicle, can pull a top-up even when the rest of the group is taxed well above 15%. The vehicle's own effective rate, and its own substance, are what the rules read.

Why Pillar Two drives demand for substance

Substance moved from a residence question to a number inside the minimum-tax computation. The GloBE rules contain a substance-based income exclusion, a carve-out that takes a slice of profit out of the top-up base before the rate is tested. That slice is calculated from two real-world inputs in the country: a percentage of eligible payroll costs, and a percentage of the carrying value of tangible assets. The carve-out percentages are higher in the transition years and step down over time toward a long-run level.

The consequence is direct. Real employees and real tangible assets in Switzerland reduce the profit exposed to the 15% test, and so reduce the top-up a group pays; a paper entity with no payroll and no assets contributes nothing, so its whole low-taxed profit is exposed. For the first time the saving from genuine presence shows up as a line in the group's own GloBE calculation for the year, rather than as an argument with an assessor years later.

In the matters we run, the part that bites is usually not the headline rate but the evidence: groups can describe the people and premises they have in Switzerland, yet they often cannot show, year by year and entity by entity, the payroll and asset figures the carve-out needs in the form the computation expects. The presence has to be real, and it has to be recorded as it happens. We size and document that presence with the minimum-tax position in view through our Swiss substance package, and run the entities that hold it through SPV administration.

This is why the old reflex, incorporate in the lowest-rate canton and stop there, no longer carries a large group. The headline rate is topped up regardless; what survives the calculation is genuine economic activity. A holding or financing vehicle that once worked on the strength of a canton's rate now has to earn its position through substance. How those vehicles are formed and structured is covered in our guides to the Swiss holding company and to opening a Swiss SPV.

What Pillar Two does not change

Pillar Two does not replace the Swiss corporate tax system; it sits on top of it. An in-scope company still files its ordinary cantonal, communal and federal return, pays the direct federal tax of 8.5% on profit after tax and the cantonal and communal profit tax, and applies participation relief and the patent box as before. The top-up only appears where the group's Swiss effective rate, after all of that, comes out below 15%.

Three further limits are worth stating plainly. Pillar Two does not abolish the cantonal rate differences, which still govern ordinary corporate tax for every out-of-scope company and for in-scope entities taxed above the floor. It does not, by itself, mean Switzerland keeps every franc of an in-scope group's top-up: the QDMTT is designed to, but its interaction with foreign IIRs and the as-yet-unintroduced UTPR determines the final allocation. And it does not turn a low rate into a liability: a 12% canton is not penalised, the shortfall to 15% is simply collected, most often by Switzerland's own QDMTT.

It also does not remove the older reasons substance mattered. Treaty beneficial-ownership tests, the place-of-effective-management residence test, and anti-abuse rules all predate Pillar Two and all still apply. The minimum-tax carve-out adds a calculable reward for substance on top of those tests; it does not displace them. A structure now has to satisfy both the residence-and-treaty questions and the new computational one.

Compliance: the GloBE Information Return and the Swiss filings

Compliance under Pillar Two runs on its own return and its own deadline, separate from the ordinary tax return. The central document is the GloBE Information Return (GIR), a standardised OECD form that reports the data behind the effective-rate and top-up calculations for every country the group operates in. In Switzerland it is filed in XML through the Federal Tax Administration's ePortal.

The first deadline is the one to mark. For a group whose financial year ends on 31 December 2024, the first GIR is due by 30 June 2026, eighteen months after the year end, a one-off extension for the first reporting year. From the second year the standard fifteen-month deadline applies. The Minimum Tax Ordinance was amended in December 2025 to require a GIR for each Swiss constituent entity, unless another Swiss entity has already filed it on the dedicated platform or a foreign entity has filed it in a jurisdiction with an activated exchange relationship.

Alongside the GIR sit the Swiss top-up tax returns themselves, the assessment and payment of the QDMTT and, where it applies, the IIR. Notification duties run earlier: an in-scope group generally registers its Swiss entities and reports basic information well before the GIR falls due. The work is heaviest in the first cycle, because the data architecture to produce the figures has to be built once and then maintained.

What this means for a group with a Swiss entity

For a group with a Swiss entity, Pillar Two reframes the Swiss question from rate to presence. The first task is to confirm scope honestly against the EUR 750 million test. If the group is in scope, its Swiss entities are assessed on their own GloBE effective rate, and any shortfall to 15% is collected, most often by the Swiss QDMTT. A low canton no longer settles the matter on its own.

From there the work is substance and compliance, done together. The substance has to be real, sized to what the structure relies on Switzerland for, and documented in the form the carve-out and the residence tests both expect. The compliance has to track the registration, notification and GIR deadlines, with the data built once and maintained. We model the scope and the top-up exposure through Pillar Two advisory, then build and run the Swiss presence behind it. The wider subject, covering economic substance and cross-border structuring, sits across our substance and Pillar Two guides.