International tax and business location competition has undergone a fundamental shift. Switzerland is coming under increasing pressure as key instruments of its previous business location policy have lost their effectiveness. A new legal opinion by Prof. Dr. Robert J. Danon and Prof. Dr. Pascal Hinny shows how Switzerland can restore its tax appeal by leveraging the new international framework and specifically strengthening tax incentives for research, development, and innovation.
Legal Opinion by Prof. Dr. Robert J. Danon and Prof. Dr. Pascal Hinny
Read the full opinion in German or French
The Current Situation
International tax and business location competition has undergone fundamental changes. Since 2024, the global minimum tax has restricted traditional tax competition to the detriment of Switzerland. In early 2026, the OECD specifically opened up new scope for substance-based business location measures. Numerous countries already have extensive tax-based R&D&I instruments in place or are aligning their business location policies with the new framework conditions.
This development is putting pressure on Switzerland, as research, development and innovation have always been among its core strengths. However, the special R&D tax deduction introduced as part of the Federal Act on Tax Reform and OASI Funding (STAF) is restrictive by current international standards. The patent box has become significantly less attractive, particularly for companies subject to the global minimum tax. The legal opinion by Prof. Dr. Robert J. Danon and Prof. Dr. Pascal Hinny outlines how the tax framework for research and innovation can be specifically strengthened so that Switzerland regains its international appeal.
The Five Key Findings
1. International competition among business locations has fundamentally changed
With the global minimum tax, traditional corporate income tax advantages are losing their significance. At the same time, Qualified Tax Incentives (QTIs), permitted since early 2026, create new opportunities for targeted, substance-based business location measures. International competition for innovative companies is increasingly shifting towards the most attractive design of such instruments.
2. Switzerland is falling short of its potential
Switzerland’s current regulations are restrictive by international standards and no longer fit into the new tax landscape: the deduction is optional at the cantonal level, capped at 50 percent and based on a narrow definition of qualifying expenses. Competitor countries have significantly more far-reaching instruments in place or are currently creating them. Against the backdrop of changing competition among business locations, an internationally competitive framework is therefore becoming increasingly important.
3. The new QTI framework opens up concrete opportunities for Switzerland
The Swiss special R&D tax deduction can, in principle, qualify as a QTI and is therefore effective even under the global minimum tax. The international framework provides for a substantive cap of 5.5 percent of Swiss personnel costs by which the minimum tax of 15 percent may be reduced. The legal opinion concludes that Switzerland could clearly strengthen its tax competitiveness in this area.
4. Short-term improvements by the cantons are possible – but they are not sufficient
Even under current law, there are opportunities to make the special R&D tax deduction more attractive through a broader interpretation of qualifying R&D&I activities and personnel costs, simpler documentation requirements and more consistent use of existing cantonal discretion. To adapt tax incentives for innovation to the new international reality, further development of Art. 25a StHG is necessary.
5. A reform must strengthen Switzerland as a hub for innovation as a whole
The legal opinion proposes a broad reform package: ranging from an expanded definition of research, development and innovation to additional qualifying costs and a higher or more flexible special deduction, as well as adjustments to tax relief limits, loss carryforwards and the National Fiscal Equalization System. The support must be designed horizontally and should be open to all companies – from SMEs to multinational corporations.
