Switzerland has a diverse system of financial incentives and tax relief that all legal business forms can use. Up until 2020, each county (canton) had its own methods to compensate businesses as part of the system of taxation. However, due to economic realignment with the rest of Europe, an equal number of incentives and relief are now available throughout the country.
These can be applied for by all companies, from international companies to those who want to start a new business in Switzerland. The majority of programmes reward companies that offer more jobs and support innovation, so it is good to know what programmes might apply to your business.
History of incentives and tax relief in Switzerland
Traditionally, Swiss cantons were famous for rewarding companies that kept jobs within their borders with large financial incentives. Many cities such as Zug and the banking capitals of Zurich and Geneva used tax relief to reward large companies, with many of the largest paying little to no taxation because of it. This is one of the reasons why Switzerland is stereotyped to be a tax haven in the eyes of many.
As of more recently, pressure has been applied to Swiss cantons to reduce and eliminate these programmes. The Federal Act on Tax Reform and AHV Financing (TRAF) came into force in January 2020, in which all old programmes were eliminated. As a result, the number of incentives for companies has been reduced to several universal programmes.
What companies benefit from tax relief and incentives in Switzerland?
All forms of legal company can benefit from these programmes, including freelancers if their criteria are met. The majority of these programmes reward employment and innovation and can be used to cover the cost of extreme spending on research and development and more recently the creation of jobs. According to Deloitte, the main benefactors of these programmes are:
- Tech, media and telecommunications companies
- Consumer product producers
- Car manufacturers
- Financial services
How does my company apply for Swiss tax relief and incentives?
All tax relief and incentives are given at the discretion of the Swiss government. This means that you will be able to benefit from these programmes automatically if you fulfil the criteria. If you believe that your company can benefit from any of the programmes listed and have not been notified, it is essential that you contact your local tax office or consult a tax advisor.
Swiss tax relief programmes
Swiss tax relief programmes are designed to reduce the cost of expanding a business or retaining people on long term employment contracts. These programmes can be applied for or awarded by a canton at their discretion. In order to qualify for these benefits, there are several criteria that have to be fulfilled. The amount and type of taxes businesses have to pay can be found in the guide to business taxes in Switzerland.
Cantonal tax holidays for businesses in Switzerland
Tax holidays are available to companies that are shown to expand operations within a specific canton of Switzerland. This can involve creating new jobs or preserving jobs during economic adversity. Tax holidays are awarded by the canton at their own discretion and can be added or removed at any time. Cantonal tax holidays can include a 100 percent reduction in local and regional taxes for up to 10 years of operation.
Swiss federal tax holidays
Federal tax holidays are a tax relief programme administered by the central government in Bern. These tax holidays are applied if your company has created at least 10 jobs in Switzerland, or has retained / based workers in an “area of economic development”.
They can also be applied if the company has retained staff during economic contractions or reorganisations of said company. Benefits from federal tax holidays can include tax relief for 10 years and significant compensation payments for furloughed workers, up to 95.000 Swiss francs a year per person.
Please note that cantonal and Federal tax holidays are only given during periods of economic uncertainty, such as pandemics or financial crises.
Patent box relief
Patent box relief is tax relief on the profits made by Swiss or foreign patents. This is income that is generated as a direct consequence of a patent that a company or individual owns. This is, once again, down to the discretion of your local canton and will be administered locally. The tax relief is up to 90 percent of patent gross income or 70 percent of profit, whichever is lower.
Financial incentives for Swiss companies
Alongside tax relief programmes, Switzerland provides some financial incentives for companies. The majority of these grants relate to research, development and greater environmental sustainability.
Research & Development super deduction
Research and development super deductions allow companies to charge costs for R&D to the cantonal authorities. This amounts to a maximum of 150 percent of costs involved in R&D being reimbursed to the company that develops the product. The rules on what counts as R&D is dependent on the canton, but the federal definition is:
- Scientific research, including basic research and applied science.
- Knowledge-based innovation such as the development of new products, procedures and services.
- Please bear in mind that this does not apply to marketing and market analysis.
Innosuisse innovation programme
The Innosuisse innovation programme is a service run by the Swiss Innovation Agency that funds and rewards science-based discovery. The fund is designed to work in conjunction with European programmes such as the ECSEL and Eureka programmes to share and support industries in promoting knowledge. It also offers training and exchange programmes to transfer talent between companies.
Sustainability grants in Switzerland
Sustainability grants are contributions by individual cantons to businesses in order to reduce the overall carbon emissions of the company and to save energy. The amount of support your company will receive is based on the canton where you are located and the size of your company. Benefits can include the installation of solar panels, more efficient insulation and heating elements for your place of work.