Switzerland: R&D tax incentives for the food and beverage sector
The food and beverage sector may qualify for additional R&D tax deduction
The food and beverage sector may qualify for additional R&D tax deduction
Research and development (R&D) tax relief is available primarily for expenses associated with qualifying personnel directly involved in R&D in Switzerland. In addition, contract R&D in Switzerland is available and eligible. The level of additional R&D tax deduction varies from canton to canton but could provide up to an additional 50% deduction against the company’s taxable income at cantonal and municipal level.
The Swiss R&D tax incentive regime, focusing on additional R&D tax deductions, are designed to recognize and reward companies investing in R&D projects. Qualifying expenditure attracts an additional R&D tax deduction if the R&D is conducted in Switzerland. The level of the additional R&D tax deduction varies (for a maximum of 50%) but could provide an additional tax deduction against the company’s taxable income on qualifying R&D expense calculated as follows:
- Qualifying personnel expenses considering an additional “lift-up” of 35% (to cover other R&D costs)
- Third-party costs (contract R&D with a related or third party) may be eligible based on 80% of invoiced costs
Scientific research and science-based innovation activities across any sector may qualify for the additional R&D tax deduction. In order to qualify, the R&D activity generally needs to meet certain criteria (such as novelty, creativity, uncertainty, systematic approach, and transferability and/or reproducibility) of the OECD Frascati Manual.
For Swiss income tax purposes, the scope of application of R&D is generally broad. The following activities in the food and drink sector may qualify for additional R&D tax deduction:
- Development of new or appreciably improved product or packaging material
- Development of new or appreciably improved production techniques to improve processing speeds or yields or reduce costs, energy, emissions and wastage
- Change of properties of foodstuff for health or environmental reasons, while maintaining the same taste, appearance, smell, and texture (for example new vegetarian or vegan meat substitutes or dairy-free products)
- Modification of a product to enhance its shelf-life
- New technologies and advancements to use and recycle waste or excess products within the production process
- The development of new or appreciably improved systems of e-business, e-ordering or e-logistics
For example, assume a company in Zurich that operates R&D and has CHF 1 million qualifying R&D expenses. The company can benefit from an additional tax deduction for R&D of CHF 500,000. This in turn would result in an annual tax benefit of approx. CHF 72,000 per CHF 1 million of qualifying expense and material cost saving for R&D activities.
Read a February 2022 report prepared by the KPMG member firm in Switzerland
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.