
Switzerland Opens Consultation for Applying OECD GIR Provisions
On April 30, 2025, the Swiss Federal Council issued a proposal to amend the Minimum Tax Ordinance to provide for the OECD GIR provisions, as well as some other small amendments.
The Total Deferred Tax Adjustment Amount is added to the current tax figure derived from the financial accounts (along with the other adjustments) to determine the total covered taxes. The calculation of the Total Deferred Tax Adjustment Amount is provided by Articles 4.4.1 and 4.4.2 of the OECD Model Rules.
The starting point is the deferred tax expense in the financial accounts.
If the rate used for financial accounting purposes is:
This figure is then subject to a number of adjustments.
1. Any deferred tax that relates to items excluded from the Pillar Two GloBE income or loss is excluded.
This makes sense and mirrors the treatment of current tax relating to these (which is also excluded).
If the underlying income isn’t subject to the GloBE rules, then including the tax would skew the resulting effective tax rate calculation.
2. Deferred tax relating to a valuation adjustment or accounting recognition adjustment for deferred tax assets is excluded.
The requirements under accounting standards vary but generally, in order to reflect a deferred tax asset in the balance sheet, there needs to be some likelihood that the asset will be available for future offset.
If it was not probable that the asset would be utilized then the deferred tax asset would need to be amended to reflect this.
There are broadly two ways of achieving this for financial accounting purposes.
One, the deferred tax asset could be shown in full, but then included an associated credit in the balance sheet to reduce its value to the level that is expected to be offset.
Alternatively, the deferred tax asset could be adjusted to just show the net amount that is expected to be utilised.
These are commonly known as the ‘gross’ or ‘net’ method of reflecting deferred tax.
In both cases, for the purpose of the GloBE rules, they are excluded.
If a loss deferred tax asset wasn’t recognised in the accounts at all due to the financial accounting criteria not being met then there is a deemed deferred tax asset for Pillar Two GloBE purposes.
If in a future year it was recognised in the accounts, this is disregarded for Pillar Two purposes as it has already been reflected.
3. Deferred tax arising from a change in the domestic tax rate is excluded from the Total Deferred Tax Adjustment Amount as it doesn’t relate to GloBE income in the current year.
4. Deferred tax arising from tax credits is excluded. You can see an example of why this is here.
5. Deferred tax relating to an increase in a deferred tax liability that isn’t paid in the next five fiscal years is clawed back at the end of the five-year period to the extent that it is unutilized. This is known as the recapture accrual.
This does not apply to a recapture exception accrual.
If this is subsequently paid this is then added back into Adjusted Covered Taxes.
6. Deferred tax relating to ‘disallowed accruals’ and ‘unclaimed accruals’ is excluded.
A disallowed actual is:
An unclaimed accrual is an increase in a deferred tax liability that is not expected to be paid within the next five years and an election is made not to include it.
An MNE may make this election as although if the increase in the deferred tax liability was included, this would be a Dr to the tax expense in the P&L and increase covered taxes, with subsequent credits in future years, unless it was a recapture accrual exception, there would need to be an amendment anyway when it was recaptured in the future. See more here.
If a disallowed or unclaimed accrual was paid in the fiscal year, this is added to the Total Deferred Tax Adjustment Amount.
On April 30, 2025, the Swiss Federal Council issued a proposal to amend the Minimum Tax Ordinance to provide for the OECD GIR provisions, as well as some other small amendments.
On March 31, 2025, Japan enacted Cabinet Order No. 121 of 2025 and Ministry of Finance Ordinance No. 19 of 2025 to provide further details on the application of Japan’s QDMTT from April 1, 2026.
In April 2025, the Hong Kong Government proposed a number of Committee Stage Amendments to the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024. This includes amendments for the January 2025 and June 2024 OECD Administrative Guidance.
South Korea’s amendment to the Enforcement Decree No. 35348 of February 28, 2025 and the Decree of the Ministry of Economy and Finance No. 1114 of March 21, 2025 provide for further aspects of the June 2024 OECD Administrative Guidance as well as additional top-up tax forms.
Updates to our ‘OECD Administrative Guidance: Domestic Implementation Matrix’ to reflect the latest April 2025 Pillar 2 updates for the UAE and Poland.
On April 7, 2025, the Polish Ministry of Finance released details for a draft bill to amend the Minimum Tax Act. The amendments are primarily to implement the June 2024 and January 2025 OECD Administrative Guidance.
On April 16, 2025, the Ministry of Finance issued Ministerial Decision No. (88) of 2025 to provide for the application of the OECD Administrative Guidance from January 1, 2025.
The UTPR exclusion for MNEs in their initial phase of international activity does not need to be included in a QDMTT, however, it can be included. In this article we look at the different jurisdictional approaches.
On January 15, 2025, the OECD issued Administrative Guidance that includes a list of jurisdictions that have transitional qualified status for the purposes of the income inclusion rule and domestic minimum tax (including the QDMTT Safe Harbour). This was subsequently updated on March 31, 2025.
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