The EUR 750 Million Threshold: Who Is Actually in Scope
Timeline: When Did Swiss MinStG Take Effect?
| Date | Event |
|---|---|
| 18 June 2023 | Swiss referendum: voters approved constitutional amendment enabling Pillar Two implementation (majority: approximately 78.5%) |
| 1 January 2024 | QDMTT (qualified domestic minimum top-up tax) and IIR (income inclusion rule) enter into force |
| 1 January 2025 | UTPR (undertaxed profits rule) enters into force |
| Revenue split | 25% to Confederation / 75% to cantons (intended to allow cantons to maintain competitive rates) |
The Three Collection Mechanisms: QDMTT, IIR, UTPR
MinStG implements three GloBE collection mechanisms in a hierarchy:
| Mechanism | Who collects | When it applies | Swiss effective date |
|---|---|---|---|
| QDMTT (Qualified Domestic Minimum Top-up Tax) | Switzerland (source country) | Swiss entity's ETR below 15% on Swiss profits | 1 January 2024 |
| IIR (Income Inclusion Rule) | Ultimate parent entity's country | Low-taxed subsidiary not covered by QDMTT in subsidiary's country | 1 January 2024 |
| UTPR (Undertaxed Profits Rule) | Other group member countries proportionally | Neither QDMTT nor IIR has collected the top-up for a low-taxed entity | 1 January 2025 |
Switzerland's QDMTT is the primary mechanism for Swiss entities in in-scope groups. Because Switzerland implemented QDMTT, it retains the right to collect top-up tax from Swiss entities of foreign MNE groups before those groups' home countries can do so via their own IIR. This was a deliberate Swiss policy choice: by collecting top-up tax domestically, Switzerland retains the revenue rather than allowing it to flow to the group's parent country tax authority.
GloBE Effective Tax Rate: How It Differs from Statutory Rate
The GloBE Effective Tax Rate (ETR) is not the same as the statutory combined CIT rate. GloBE income is calculated under specific GloBE rules that differ from Swiss accounting and tax principles:
- GloBE income starts from financial accounting income (IFRS, Swiss GAAP, or equivalent) and makes specified adjustments - not from Swiss taxable income
- Certain income items are excluded from GloBE income (dividends and capital gains qualifying for the participation exemption are largely excluded from the GloBE ETR denominator)
- Covered taxes are the adjusted taxes included in the GloBE ETR numerator - which can differ from taxes actually paid due to deferred tax adjustments
- The GloBE ETR = Adjusted Covered Taxes / GloBE Income
- If GloBE ETR falls below 15%, top-up tax = (15% - GloBE ETR) x GloBE income
Substance-Based Income Exclusion (SBIE)
The SBIE is the most important relief mechanism for Swiss entities with real operations. It reduces GloBE income before applying the 15% test by excluding a formulaic amount linked to payroll costs and tangible assets:
| Period | Payroll exclusion rate | Tangible asset exclusion rate |
|---|---|---|
| 2024-2025 | 9.8% | 7.8% |
| 2026 | 9.6% | 7.6% |
| 2027 | 9.0% | 7.0% |
| 2028 | 8.2% | 6.6% |
| 2029 | 7.5% | 6.3% |
| 2030 | 6.6% | 5.6% |
| 2031 | 5.6% | 5.6% |
| 2032+ | 5.0% | 5.0% |
For a Swiss manufacturing entity with CHF 50 million in qualifying payroll and CHF 100 million in tangible assets in 2024, the SBIE excludes CHF 4.9 million (payroll) + CHF 7.8 million (assets) = CHF 12.7 million from GloBE income. If total GloBE income is CHF 15 million, only CHF 2.3 million remains subject to the 15% test.
Three Transitional Safe Harbours (2024-2026)
The OECD's transitional safe harbour package allows MNE groups to avoid a full GloBE computation for any jurisdiction where the country-by-country report (CbCR) shows sufficient coverage. Three alternative safe harbours apply for fiscal years beginning on or before 31 December 2026:
| Safe harbour | Condition |
|---|---|
| 1. De minimis | Total revenue in jurisdiction below EUR 10M AND total income/loss below EUR 1M per CbCR |
| 2. Simplified ETR | CbCR simplified ETR (covered taxes / pre-tax income from CbCR) at or above: 15% for 2024, 16% for 2025, 17% for 2026 |
| 3. Routine profits | GloBE income at or below SBIE amount for the jurisdiction (substance offsets all GloBE income) |
If any one safe harbour applies for a given jurisdiction and year, no GloBE computation or top-up tax is due for that jurisdiction that year. Many Swiss entities of in-scope groups qualify under the simplified ETR test: Swiss statutory CIT rates in leading cantons (11.9-13%) are below 15%, but covered taxes in the CbCR often include deferred taxes that push the simplified ETR above the threshold.
Impact on Swiss Patent Box and R&D Super-Deduction
For in-scope groups (EUR 750M+ revenue), the patent box and R&D super-deduction reduce Swiss taxable income and thus the taxes included in the GloBE ETR numerator. This can lower the GloBE ETR below 15% for R&D-intensive Swiss entities, triggering top-up tax. The top-up erodes some or all of the patent box / R&D deduction benefit.
For sub-threshold groups, there is zero impact. Patent box and R&D super-deduction benefits are fully preserved without any Pillar Two overlay.
GloBE Information Return Filing
| Fiscal year end | Filing deadline |
|---|---|
| 31 December 2024 (first year) | 18 months = 30 June 2026 |
| 31 December 2025 onwards | 15 months = 31 March 2027 |
The GloBE Information Return is filed with the Swiss ESTV (Federal Tax Administration). It covers all Swiss constituent entities of the in-scope MNE group. Switzerland exchanges GIR data with other jurisdictions under international exchange mechanisms consistent with OECD information exchange standards.
What Pillar Two Does Not Affect
For groups below EUR 750M consolidated revenue:
- Participation exemption (Beteiligungsabzug, DBG Art. 69-70): fully effective
- Patent box (StHG Art. 24a): fully effective (up to 90% CIT reduction on qualifying IP income)
- R&D super-deduction (StHG Art. 25a): fully effective (up to 150% deduction on Swiss R&D)
- Cantonal rate competition (Zug 11.9%, Schwyz 11.8%, Lucerne 11.1%): fully effective
- Swiss holding company structures: no Pillar Two overlay
- Swiss shelf companies: entirely out of scope
Frequently Asked Questions
Does Pillar Two apply to all Swiss companies?
No. Only MNE groups with EUR 750M+ consolidated revenue in at least 2 of 4 preceding years. All sub-threshold Swiss companies and holding structures are entirely outside MinStG scope.
What is the Swiss MinStG and when did it take effect?
MinStG (SR 642.25) is Switzerland's Pillar Two implementation. QDMTT and IIR effective 1 January 2024; UTPR effective 1 January 2025. Revenue split 25% Confederation / 75% cantons.
What is the difference between QDMTT, IIR, and UTPR?
QDMTT: Switzerland collects top-up tax on Swiss entities below 15% ETR. IIR: parent country collects on low-taxed subsidiaries. UTPR: backstop collected by other group members proportionally. QDMTT takes priority.
What is the substance-based income exclusion (SBIE)?
SBIE reduces GloBE income by 9.8% of payroll costs and 7.8% of tangible assets (2024-2025 rates). Entities with significant physical presence in Switzerland can substantially reduce or eliminate top-up tax through SBIE.
What are the three Pillar Two transitional safe harbours?
De minimis (revenue below EUR 10M + income below EUR 1M), simplified ETR (CbCR ETR at/above 15%/16%/17% for 2024/2025/2026), and routine profits (GloBE income at/below SBIE). Any one qualifies the jurisdiction for that year.
Does Pillar Two neutralise the Swiss participation exemption and patent box?
For in-scope groups: partially, depending on entity-level ETR and SBIE. For sub-threshold groups: zero impact. All incentives remain fully effective below EUR 750M.
When must Swiss in-scope MNE groups file the GloBE Information Return?
18 months for the first fiscal year (fiscal year ending 31 December 2024: deadline 30 June 2026). 15 months from fiscal year 2025 onwards. Filed with ESTV (Federal Tax Administration).
Does Pillar Two affect a Swiss shelf company or mid-market holding structure?
No. The EUR 750M threshold excludes virtually all mid-market structures. Swiss shelf companies and holding companies for sub-threshold groups are entirely outside MinStG.