Switzerland to apply January 2025 Pillar Two guidance from FY 2025

The changes

The below summary outlines the main changes and implications for in-scope MNEs with Swiss operations:

The January 2025 AG mainly addresses certain allegedly harmful deferred tax positions stemming from the transition period under the OECD Pillar Two proposal (Article 9.1).
The guidance introduced a material extension to potentially harmful deferred tax assets by introducing new definitions and criteria for articles 9.1.2 and 9.1.3 of the Model Rules by:
- Disallowing deferred tax expenses from such harmful DTAs from the calculation of Adjusted Covered Taxes; and
- Suspending the application of the QDMTT Safe Harbor for MNE Groups (Switch-Off) that would still apply such DTA outside of a given amount (Grace Period Limitation).
By design, these changes were viewed by the OECD as being applicable retroactively, especially to financial years that were already closed at the time of the release of the January 2025 AG.
Swiss parliament viewed these changes as being retroactive in nature and thus potentially in violation of constitutional principles.
As part of the amendment, the January 2025 AG applies in Switzerland only to FY beginning on or after 1 January 2025. For years beginning before that date (notably 2024) it is disregarded.
The change enters into force on 15 November 2026. 2024 assessment procedures can now be finalised.
For business years from 2025 onwards the guidance applies in full, i.e., also to DTAs triggered by fact patterns stemming from FY predating 2025.

The core structure of the MindStV is otherwise unchanged. The amendment is therefore a targeted temporal carve-out to avoid retroactive effects on already closed 2024 years.

The impact

Assess IIR impact: Affected MNE Groups may receive FY 2024 QDMTT assessments and should carefully monitor the impact on IIR level in other jurisdictions. Unlike statements by the Swiss government, many European jurisdictions also do not apply the January 2025 AG retroactively for constitutional reasons and thus a IIR pick-up is not a guaranteed outcome. There may be differences in the interpretation of in-scope DTAs under the January 2025 AG where jurisdictions may necessarily view certain DTAs as being in-scope.
Caveats in 2025 QDMTT filings: QDMTT filings for FY2025 should contain prudent caveat re potential challenge and refund of top-up tax paid in Switzerland.
Challenges to 2025 assessments: The implemented changes may not fully shield Switzerland from constitutional challenges in the context of the January 2025 AG notably as domestic law still considers the AG as a means for interpretation (even where the AG amends the Model Rules and not only clarifies it) and the chosen limitation for the guidance may still infringe constitutional rights of taxpayers in view of unlawful retroactivity (e.g., by treating pre January 2025 DTA-triggers the same as triggers occurring after release of the AG).
Link to side-by-side: The same considerations may apply to (a) the side-by-side system as it is applied without amendment of domestic law) and (b) overall challenge of the IIR framework in Switzerland on grounds of unequal treatment for Non-US-Parented Groups vs US-Parented Groups.

For the full text of the Swiss Federal Council's announcement, please see

Bundesrat passt Mindestbesteuerungsverordnung an (available in German and French).