Economic development in Switzerland is characterized by the strong Swiss franc, the climate of uncertainty in the eurozone and the Far East, and the ever-diminishing room to maneuver left by increasingly strict compliance requirements. A joint study conducted by KPMG Switzerland, the Swiss-American Chamber of Commerce, the Swiss Federation of Small and Medium Enterprises (SGV) and economiesuisse has shown that tax incentives provide a significant boost to research and development activities, thus helping to drive innovation in Switzerland.
Research and development (R&D) are vital pillars of innovation and also have an indirect impact on economic growth. Switzerland is an enterprising country, boasting one of the world’s most innovative economies. It holds this prominent position thanks to the multinational corporations based in the country, as well as large companies and a great number of highly successful small and medium enterprises (SMEs) that make a significant contribution to innovation on Swiss soil.
Growing economic and political pressure on Switzerland has led to significant efforts being made to ensure that businesses can remain competitive on this market and boost innovation within the country. Such measures include tax incentives, which aim to promote R&D activities and also form part of the Swiss Federal Council’s proposals for Corporate Tax Reform III.
The OECD is placing ever more restrictions on the ways in which measures on the income side – such as the Patent Box – can be used, greatly limiting their effectiveness. However, there are high hopes for a targeted approach to promoting R&D through tax incentives on the expenses side.
KPMG Switzerland and the Swiss-American Chamber of Commerce teamed up with the Swiss Federation of Small and Medium Enterprises (SGV) and the economic umbrella organization economiesuisse to conduct a study that took a closer look at the use of tax incentives, asking some 700 large companies and SMEs about their R&D activities. The study led to three major findings:
The survey of large companies and SMEs clearly shows that introducing tax incentives for R&D would strongly encourage companies to keep their existing R&D activities in Switzerland and base additional national and international operations in the country.
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