Patent Box: cutting tax on patent profits in Switzerland

The delicate part is not the tax but the technical work: establishing which rights qualify and documenting it properly. That is where you need someone who knows patents, not only taxation.

What it is and where it comes from

• Introduced in Switzerland by the TRAF tax reform, in force since 1 January 2020.
• It applies at cantonal level — the federal harmonisation act provides for it only there — and is compulsory in every canton, but each canton sets the size of the relief.
• It rests on the OECD nexus approach: the benefit is proportionate to the share of research and development actually carried out in Switzerland. It is not an automatic discount; it is tied to real innovation activity.

What it is worth in practice

• Preferential taxation of a very high share of the profits that qualify for the Patent Box.
• An additional deduction for research and development costs.
• Taken together, they produce substantial overall relief on taxable profit.
• The effective rate on profit can fall among the lowest in Switzerland for innovative businesses.

Because the Patent Box is a cantonal regime, the size of the relief varies from canton to canton: some are among the most advantageous in Switzerland for innovative businesses. The legal basis in the canton where we practise: art. 67b LT (Patent Box) and art. 73a LT (R&D deduction), with the detailed calculations to be filed with the tax return.

Who it genuinely suits

• Companies with patents of their own and profits linked to those patents.
• Companies carrying out genuine research and development, largely in Switzerland.
• Innovative SMEs in manufacturing, engineering and tech — where the value comes from a protected right.

It is of little or no use to companies without patents, or whose research and development happens almost entirely abroad: the nexus rule cuts the benefit proportionately.

What we do

• The patent side: identifying which rights qualify for the Patent Box, checking their validity and coverage, tracing the link between patent, product and profit, and preparing the technical documentation that will support the claim.
• Setting up the calculation of the Patent Box benefit, which we handle ourselves: this is where the reading of the rights and the tax reading have to meet.
• Coordination with the company’s fiduciary remains for the filing itself — that is, for carrying the benefit into the tax return.

The cross-border angle

Take care not to confuse two different things that share a name:

• The Swiss Patent Box — relief on patent profits, at cantonal level. That is the one described above.
• The Italian Patent Box — a different mechanism: an uplift on research and development costs relating to patents, copyright-protected software, designs and models — trademarks and know-how excluded — which can be combined with the R&D tax credit.

They are two distinct regimes, with different logic and different advantages, and we handle both. For a company operating on both sides of the border, or a group with companies in Switzerland and Italy, knowing which applies where — and how not to overlap them — is exactly the sort of question an adviser active in both countries can read and a purely local one cannot.

If you do not have a patent yet

The Patent Box starts from rights you already hold. If the invention exists but the patent does not, that is where the route begins: → Patent filing.