Switzerland expects to net CHF 1.6 billion (about $1.8 billion) from the first year of operation of its pillar 2 legislation, according to the 2024 budget.
The Federal Council announced August 24 the publication of Switzerland's 2024 budget and financial plan for 2025 to 2027, which projects a structural financing deficit of CHF 22 million resulting from the August 11 termination of the loss protection guarantee by UBS Group AG after its acquisition of Credit Suisse Group AG in March.
Revenue for 2024 is estimated at CHF 83.1 billion, which is 5 percent above the estimate for 2023, while the government anticipates CHF 89.7 billion in spending, according to the budget, which the government submitted to the parliament August 23.
Switzerland is among the nearly 140 jurisdictions in the inclusive framework on base erosion and profit shifting that have agreed on a sweeping overhaul of the international corporate tax system to address the challenges of the digital economy.
Pillar 2 of the OECD's two-pillar plan to reform global corporate tax rules would ensure that multinational enterprise groups with annual revenues exceeding €750 million pay an effective tax rate of 15 percent in all jurisdictions in which they have operations. The plan rests primarily on a top-up taxation framework called the global anti-base-erosion (GLOBE) rules, which consist of the income inclusion rule and the UTPR — originally known as the undertaxed payments rule but sometimes called the undertaxed profits rule. Countries may opt to implement domestic minimum taxes in line with the rules. Those taxes would apply before the GLOBE rules.
Switzerland plans to implement pillar 2 by applying a supplementary tax — a domestic minimum top-up tax — and an IIR through a staged process involving the adoption of a temporary ordinance to allow the minimum tax rules to come into force January 1, 2024. Once pillar 2’s application is sufficiently clear, the Swiss parliament plans to pass a federal law to repeal the temporary ordinance. Swiss voters approved the adoption of the pillar 2 rules in June.
Switzerland expects CHF 1.6 billion in revenue from the supplementary tax in 2026 — when the first revenues from the tax are expected to be collected — with CHF 400 million of that going to the federal government, according to the budget. The Federal Department of Finance previously reported that half of Switzerland’s cantons would likely raise CHF 530 million collectively in the first year of the tax's operation, but 13 cantons had not submitted their estimates at that time.
The federal government also plans to repeal the tax exemption for electric vehicles, which would leave them liable for a 4 percent tax on vehicle value upon import starting in 2024, according to the budget . The repeal, which was opened for consultation this spring, is expected to generate additional revenue of CHF 180 million in 2024, which could accumulate to between CHF 2 billion and 2.7 billion by 2030.
Corporate income tax, which is levied on profits, is expected to net CHF 15 billion in revenue for 2024, a 3.6 percent increase over the 2023 estimate. Withholding tax revenue is expected to continue to decline, and Switzerland has updated its trend forecast to reflect that. VAT revenue is expected to increase by 7 percent in 2024 largely due to pension reform, known as the AHV 21 reform, which will proportionally increase VAT rates by 0.4 percentage points on the normal rate from January 1, 2024, and generate CHF 1.1 billion in revenue in 2024.
Switzerland will set aside CHF 100 million in 2025 (covering 2023 and 2024) to pay the two French departments whose residents work in Geneva and pay their taxes there, per the protocol to the France-Switzerland tax treaty, which was signed June 27. The agreement, which is expected to enter into force January 1, 2025, permits cross-border home working for up to 40 percent of annual working time. From 2026, the federal annual contribution is expected to be around CHF 50 million a year. The countries have agreed to apply the terms of the agreement provisionally through 2024.