The OECD/G20 minimum tax (“Pillar 2”) fundamentally changes the effectiveness of tax-based business location incentives. Tax incentives that reduce taxable income or the effective tax burden will lose all or part of their effect for the affected corporate groups.
However, the “Administrative Guidance” issued in January 2026 opens up a new, albeit limited, scope for action through the “Substance-based Tax Incentive Safe Harbor”: Certain substance-based tax incentives can be treated as “Qualified Tax Incentives” (QTI) and increase the adjusted reported taxes up to the amount of a substance cap. This allows the economic benefit of such incentives to be preserved under Pillar 2. Treatment as a QTI is more advantageous than the existing “Qualified Refundable Tax Credits” and “Marketable Transferable Tax Credits” because it increases adjusted taxable income without increasing GloBE profit. However, this benefit is limited by the “substance cap” and requires sufficient substance in the form of payroll expenses or property, plant, and equipment in the relevant jurisdiction.
For Switzerland, the picture is mixed. The special R&D deduction should qualify as an expense-based QTI to the extent that the deduction exceeds actual expenses and the other requirements are met. The patent box, on the other hand, does not qualify because it is income-based. The cantonal incentive measures in Zug, Basel-Stadt, and Lucerne must be assessed on a case-by-case basis: Direct payments do not fall under the QTI definition, whereas contributions structured as expense-based tax credits may, in principle, be eligible for QTI treatment.
Nevertheless, the practical significance for Switzerland remains limited. QTIs are unlikely to fully replace the incentives weakened by Pillar 2. There is therefore a strong case for Switzerland to approach business location promotion in the future not only through tax measures but increasingly through non-tax measures as well.
