Driving innovation through tax policy in Switzerland

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Driving innovation through tax policy in Switzerland

Sponsored by

Sponsored_Firms_deloitte.png
Reverse hybrid entities become subject to Dutch CIT on January 1 2022

Manuel Angehrn and Loris Lipp of Deloitte discuss the tax benefits that Switzerland has introduced to maintain its reputation as a global leader in innovation.

The phrase ‘innovate or die’ may sound simple, but for businesses, it is a reality. Even more so in times when business is haunted by a global pandemic, and simultaneously faces the challenges of climate change.

To retain its position as a global innovation centre with attractive taxation, Switzerland in 2020 introduced both input and output research and development (R&D) tax incentives, with the clear intention to strengthen Switzerland`s position as an innovative R&D hub. All incentives were designed with the OECD framework against harmful tax regimes in mind, thus – allowing for internationally accepted – tax benefits that can further reduce the already very competitive headline tax rates, which are below 12% in some Swiss cantons.

R&D deductions

As part of the new rules, companies with Swiss sourced R&D activities may opt-in for an additional tax deduction of up to 50% of R&D related employee costs (including a mark-up) and/or qualifying contract R&D expenses. In order to simplify the determination of qualifying R&D activities, Swiss tax authorities will, among others, rely on the definition of R&D as provided by the OECD-Frascati manual (2015 edition).

The deduction covers both basic research and process/product application related innovation. The additional R&D deduction is possible, even in case no future profit derives from the underlying R&D spending.

Patent box

In addition to input promotion, Swiss tax law allows for an output promotion following the OECD-nexus approach and allowing for an additional R&D deduction of up to 90% on patent-related income. The patent box is available in all Swiss cantons and provides companies with a registered patent or comparable right (in Switzerland or abroad) with an efficient instrument to optimise taxation for the useful life of the patent.

Switzerland opted for a patent box that limits the additional administrative burden and reliance on registrations with a recognised patent office. Companies with eligible patents may determine the box profit either by way of a top down approach or bottom up, i.e. based on adjusted patent/product income (with lump sum deductions and brand related costs) or based on taxable income with pre-defined deductions for certain categories of income. The patent box deduction is limited by the ‘nexus ratio’, that determines the Swiss-sourced R&D related to the patent. Acquisition costs for a patent and related party R&D costs from outside of Switzerland reduce the ‘nexus ratio’, while Swiss-sourced R&D expenses and global contract R&D expenses from third parties (with a mark-up of 30%) benefit the ‘nexus ratio’.

To avoid ‘double deductions’, the opt-in to a patent box regime requires entrance taxation of historic R&D expenses related to the patent within five years, with many cantons offering flexible application of the box deduction rather than levying an entrance cash-tax.

The innovation benefits provided by the Swiss tax law should allow Swiss-based companies to keep a competitive edge, attract more foreign investment and allow the country to retain its position as a global innovation leader.



Manuel AngehrnT: +41 58 279 7279E: maangerhn@deloitte.ch

Loris LippT: +41 58 279 60 00E: llipp@deloitte.ch

more across site & shared bottom lb ros

More from across our site

The cuts disproportionately affected staff in certain positions, the report also found; in other news, MHA announced the €24m acquisition of Baker Tilly South East Europe
The plan aims to improve the efficiency, transparency, and effectiveness of direct tax administration in India
Meanwhile, South Africa’s finance minister has accepted a court decision on suspending a VAT increase and US President Donald Trump mulls a 100% tariff on foreign films
Jaime Carey speaks about the benefits of his tax background, DEI values, the use of AI for a smarter legal practice, and other priorities that will define his presidency
Historically low levels of attrition over consecutive years made a ‘difficult decision’ necessary, PwC has reportedly said
WTS Global is also vetting new potential member firms in Algeria, Cote D’Ivoire and Benin, Kelly Mgbor tells ITR in an exclusive interview
The scope of qualifying pillar two tax credits could reportedly be broadened; in other news, hundreds of IRS appeals staff are to resign
For many taxpayers, the prospect of long-term certainty that a bilateral APA offers can override concerns about time, cost and confidentiality
Levine, who served under the Joe Biden administration, led the US’s negotiations on the OECD’s two-pillar solution
The deal to acquire ITR's parent company is expected to complete by the end of May 2025
Gift this article