A guide to available R&D tax incentives worldwide A guide to available R&D tax incentives worldwide

Analyzing the benefits of local R&D incentives is time-consuming and complex.

KPMG is pleased to present our Global R&D Incentives Guide, which will be updated on a regular basis. This guide provides an overview of R&D tax incentives available throughout the world, highlighting incentives that could present significant value to your organization.

Decisions on where to conduct R&D activities involve many factors, including the availability of the necessary talent, the relative costs of labor, materials and facilities. In addition, R&D tax incentives and the impact of R&D costs on other tax benefits may play a role in evaluating the overall cost of performing R&D in one country versus another. Identifying any available local R&D incentives and then analyzing the feasibility and benefits of these through to claiming them can often be a time-consuming and complex project. For the first phase of identifying available R&D tax incentives, KPMG provides a global guide to give an initial rough overview, which should help in the course of evaluating possible R&D locations.

R&D tax incentive schemes are widely adopted in advanced economies. As more countries have recognized the importance of research and innovation for economic growth, they have added R&D incentives and increased their support of R&D using grants and other forms of funding. Currently, over 50 jurisdictions have some form of an R&D tax incentive, and some countries offer multiple R&D incentives.

The effectiveness of R&D tax incentives has been the subject of much global debate and is well documented in academic studies and research. Although some early studies challenged the effectiveness of R&D tax incentives, the majority of the studies find that R&D incentives increase private investment and innovation, influence the location where companies conduct R&D and in turn manufacture their products, and also lead to a number of societal benefits.

For each jurisdiction and primary incentive, the KPMG Global R&D Incentives Guide provides the following:

• overview or summary of the incentive and relief provided;
• local definition of R&D;
• eligibility requirements;
• relevant dates, including statutory filing;
• overview of the registration process and administrative and jurisdictional requirements; and
• summary information on other applicable or related incentives.

Switzerland is a prime location for companies involved in R&D activities and in the exploitation of patents. Since 2020 Switzerland offers tax incentives for cantonal/municipal taxes, enabling companies to structure their R&D activities as well as valorizing the intellectual property resulting from R&D activities in a tax-efficient way. What is available?

R&D super deduction:

• allows for an additional tax deduction for up to 50% of actual R&D costs;
• is only relevant for R&D costs if these were incurred by the taxpayer itself or indirectly, by others, in Switzerland;
• is based on personnel expenses for R&D staff plus an additional lift-up of 35% (to cover other R&D costs);
• is based on 80% of invoiced costs for indirect R&D (contract research);
• is applicable to R&D activities aimed at finding new insights that are creative, uncertain and systematic and whose results are transferable and reproducible.

Patent box:

• taxes income arising from patents and similar rights held in Switzerland and abroad at a reduced level – provided there is a relevant connection (nexus) to Switzerland;
• sees a connection (nexus) if patents and similar rights are related to qualifying R&D costs;
• takes into consideration licensing income, profits generated from patent income embedded in product price and profits arising from the sale of patents and similar rights;
• lowers taxation by a maximum of 90%;
• may generate costs when exercised the first time (entry taxation).

Explore which R&D incentive is available in Switzerland per canton: TRAF – Swiss Tax Landscape - KPMG Switzerland (home.kpmg)