With effect from 1 January 2020, the STAF has introduced the patent box and R&D incentive regimes so that Switzerland remains an attractive location for innovative companies. Irrespective of size and industry, the patent box regime enables companies to lower their tax base if they own patents or comparable rights (e.g. licenses) and incur R&D expenses in Switzerland. Under a relatively narrow definition of patents or comparable rights that qualify for the patent box, the income arising from such patents or comparable rights is subject to a reduced tax rate. In case companies solely generate royalties by licensing patents, this income can be determined easily and directly. On the other hand, if royalties are embedded in product prices, this income must be determined indirectly. However, the tax reduction for the patent box income is tied to substance requirements of the OECD's modified nexus approach, which is directly related to the R&D activities performed in Switzerland.
In addition to the patent box regime, many cantons (optional measure on a cantonal level) have introduced a special deduction for R&D expenses of up to 50% of Swiss R&D activities. Such special deductions for R&D costs can add up to 70% of the taxable income ("relief limit").