Best Practice for a Swiss R&D Input Tax Incentive

MME Feasibility Study dated June 2015

Feasibility Study "Best Practice for a Swiss Input Tax Incentive" (PDF, 263 Kb)

Analysis of the current CTR3 law proposal (PDF, 29 Kb) including demand charter for the parliamentary discussion

The Swiss Corporate Tax Reform III (CTR3 / USR3) project, currently under consideration, should offer new internationally accepted tax benefits in order to keep Switzerland competitive and attractive. In that connection, the introduction of a Patent Box - among other measures - is proposed.

However, current international tax developments - in particular on the level of the OECD - show that the impact of the proposed Swiss Patent Box will be limited massively. Therefore, it is encouraging that the Federal Council proposes an expense-related R&D&I tax incentive in the law proposal of the Corporate Tax Reform III as an additional measure.

Based on the attached feasibility study, we strongly support and recommend introducing an R&D&I tax incentive as part of the CTR3 - in combination with a competitive Patent Box - with the following key features:

  • The introduction of a tax credit system (in contrast to the super deduction model as intended in the law dated 5 June 2015), with the option from an international accounting standpoint to treat this tax credit benefit as an ″above the line″ (i.e. above EBIT) income item, instead of a reduction in corporate tax (i.e. below EBIT).
  • The tax credit rate (as applicable) and as such the amount of the tax credit is at the discretion of the Cantons. 
  • In principle, no tax credit for companies in the case of a loss situation; a carry forward should be possible within the framework of the current carry forward legislation. 
  • Only for R&D&I activities carried out in Switzerland qualify for the tax incentive; for R&D&I activities incurred across subsidiaries of the same group within different Cantons appropriate measures have to be taken. 
  • The tax credit has to be calculated on qualifying R&D&I expenses, i.e. on the volume of R&D&I (volume-based approach), without minimal threshold or maximum amount (no ceiling). 
  • An abstract definition of qualifying R&D&I expenses at Federal level (Tax Harmonization Law), with precise and/or self explanatory guidelines that may be adapted easily.

Download the feasibility study and support our demands!

Feasibility Study "Best Practice for a Swiss Input Tax Incentive" (PDF, 263 Kb)

Analysis of the current CTR3 law proposal (PDF, 29 Kb) including demand charter for the parliamentary discussion

 

Further information and relevant documents regarding tax incentives for research and development can be found here.

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