Patent box: preferential taxation of patents

Among the instruments introduced by the tax reform that came into force in 2020 is the patent box, a regime that taxes at a reduced rate the profits deriving from patents and comparable rights. It is a lever designed to reward innovation carried out in Switzerland, but it is also one of the most technical reliefs in the system: it works well only if the company has genuine patent activity and knows how to document it. Let us look at how it operates and who it makes sense for.

What the patent box is

The patent box allows a company to isolate the share of corporate profit that derives from patents and comparable rights and to tax it at a lower rate than ordinary profit. In practice, a portion of that profit is excluded from the cantonal tax base.

It is a cantonal instrument: the reduction concerns cantonal and communal tax, not the direct federal tax. Each canton implements it within the limits set by federal law, with a maximum relief on qualifying profit that can reach up to 90%. Ticino has incorporated the patent box into its own tax legislation.

Which rights grant access

Within the scope fall patents (Swiss, European, foreign) and certain protected comparable rights, such as supplementary protection certificates or software protections in specific contexts. Trademarks, however, do not fall within it: a trademark, however valuable, does not open the doors of the patent box. The distinction is clear-cut and must be verified carefully before relying on the regime.

The nexus principle

The heart of the patent box is the OECD-based nexus approach: the relief is proportionate to the share of research and development actually carried out by the company itself (or commissioned to independent third parties in Switzerland). In practice:

If the company developed the patent through its own R&D activity, it benefits fully from the relief.
If the patent was largely purchased or developed by group companies abroad, the qualifying share is reduced.

This principle prevents patents from being “parked” in Switzerland solely for tax reasons: the relief follows substance, that is, real research.

Entering the regime

Entering the patent box involves a moment of adjustment: the research and development expenses already deducted in the past for that patent are generally added back to taxable profit on entry, and then progressively offset by the benefits of the regime in subsequent years. This is an aspect that must be calculated, because in the first period the net effect may be less favourable than it seems if you look only at the reduced rate.

You must also consider the overall relief cap: the patent box, the R&D deduction and other cantonal reliefs together cannot reduce taxable profit beyond a maximum threshold set by law (as a rule 70%). There is therefore a ceiling on cumulative optimisation.

Who it really makes sense for

The patent box is of interest for:

Companies with an active patent portfolio that generates identifiable profits (licences, patented products).
Businesses that carry out R&D in Switzerland and can document the nexus.
Sectors such as tech, pharmaceuticals, medical devices and precision engineering.

It is, on the other hand, of little relevance for those who do not patent, for pure service activities and for those who base their value on trademarks and reputation rather than on protected inventions.

In summary

The patent box taxes patent profits at a reduced rate, at cantonal and communal level.
Relief on qualifying profit can reach up to 90%, within cantonal limits.
Patents and comparable rights count, not trademarks.
The nexus links the relief to the R&D actually carried out.
On entry, the R&D expenses deducted in the past are adjusted.

How we help you

We assess whether your patent portfolio qualifies for the patent box, calculate the qualifying share according to the nexus and manage entry into the regime, coordinating it with the R&D deduction. Study your tax relief.