In this blog we outline the key aspects of the Basel innovation credit based on the recently enacted ordinance on the cantonal act promoting business in the Basel area (Verordnung zum Standortförderungsgesetz or StaföV). For Basel-based companies with research and development (R&D) or clinical trial activities, such innovation credit can be financially quite attractive. Some restrictions are very Basel orientated and we hope that later revisions will relax some requirements.
1. Qualifying Companies
All legal entities subject to unlimited taxation in Basel Stadt qualify for the innovation credit if they are primarily active in research and development (R&D) driven sectors like food, chemicals, life sciences, metal, machinery, high-technology instruments, and manufacturing or services related to information & communication technology (ICT). In addition companies qualify if eligible R&D expenses exceed at least 10% of their total expenses over the last three years (or if shorter, since foundation). Legal entities subject to limited taxation in Basel-Stadt only qualify if eligible expenses (depreciation on tangible assets R&D, depreciation on tangible assets for high-tech production) in Basel-Stadt amount to at least CHF 100'000 in the relevant year.
2. Qualifying Expenses
- Personnel Expenses: Salaries for employees primarily working in Basel-Stadt or the broader Northwest Switzerland region and engaged in R&D activities, including researchers, technical specialists, support staff, and personnel ensuring regulatory compliance and IP protection.
- Depreciation on Assets: Regular depreciation on tangible assets located in Switzerland and used for R&D or high-tech production. Extraordinary depreciation is excluded.
- Clinical Trials: Expenses for clinical trials conducted in Switzerland or for manufacturing active ingredients for these trials in Switzerland. Only direct expenses qualify (subcontracting is excluded). Funding is provided to commissioning company only for expenses incurred by a CRO/CMO that itself conducts the clinical trials or manufactures the necessary active ingredients. If the CRO/CMO conducts the clinical trials in Basel-Stadt or in Northwest Switzerland or manufactures the necessary active ingredients in in Switzerland, it can be assumed that the same expense also qualifies for the CRO/CMO.
3. Credit Amount
The credit amount depends on the location and type of expense:
- Personnel in Basel-Stadt: 25% (expenses < CHF 5M), 20% (CHF 5M - CHF 50M), 5% (> CHF 50M). An additional 3% applies to patent-related expenses.
- Personnel in Northwest Switzerland (excluding Basel-Stadt): 10% of the applicable Basel-Stadt rate.
- Depreciation on Assets in Basel-Stadt: 25% (expenses < CHF 1M), 20% (CHF 1M - CHF 5M), 5% (> CHF 5M). An additional 3% applies to patent-related expenses.
- Depreciation on Assets in other Swiss Cantons: 10% of the applicable Basel-Stadt rate.
- Clinical Trials: 10% of eligible expenses.
4. Deadlines
Applications must be submitted electronically by 30 June of the year following the relevant calendar year. For 2024, the deadline is September 30, 2025.
5. General Documentation Requirements
- Current Commercial Register Excerpt.
- Audited Annual Financial Statements: Provides a comprehensive overview of the company's financial performance during the relevant fiscal year. If the Company has no auditor elected, we recommend to conduct an EGM in Q3 2025. According to the confirmation of the Amt für Wirtschaft und Arbeit (Department of Economics and Work), companies which only have a limited audit of their annual financial statements, are excluded from the application for the innovation credit.*
- Auditor's Confirmation: This statement from the company's auditor must verify the calculation basis used for determining the eligible expenses.
6. Specific Documentation
The required additional documentation varies depending on the specific expenses claimed but generally includes the following:
- Personnel Expenses: Detailed payroll records demonstrating the salaries and other compensation paid to employees engaged in qualifying R&D activities; documentation of the employees' roles and responsibilities, demonstrating their involvement in R&D; and proof of their primary place of work (Basel-Stadt or Northwest Switzerland).
- Depreciation on Assets: Asset register or fixed asset schedule listing the tangible assets used for R&D or high-tech production; depreciation calculations showing the regular depreciation claimed for the relevant fiscal year; proof of the location of the assets (Basel-Stadt or elsewhere in Switzerland); and documentation demonstrating the use of the assets in qualifying R&D or high-tech production activities.
- Clinical Trials: Contracts with third-party service providers for conducting clinical trials or manufacturing active ingredients; invoices and proof of payment for clinical trial expenses; and documentation confirming that the clinical trials were conducted in Switzerland and/or the active ingredients were manufactured in Switzerland.
The authorities may request further documentation or clarification as needed. It is crucial to maintain accurate and organized records of all relevant expenses and supporting documentation.
8. Other Relevant Information
- Limits: The credit for expenses outside Basel-Stadt cannot exceed twice the credit for expenses within Basel-Stadt. Total credits are limited by available funds, with proportional reductions if necessary.
- Exclusions: Companies in bankruptcy or liquidation are excluded. Outstanding payments to authorities may offset the credit. Double funding of the same measure is not permitted.
- Auditing: Authorities may conduct audits up to five years after the decision.
9. Example
The following example provides an illustrative calculation for a life sciences company located in Basel-Stadt with following expenditures in 2024:
Expenditure type | Amount | Rate | Innovation Credit |
Personnel Expenses | |||
Standard expenses for employees located in Basel-Stadt | CHF 2'500'000 | 25% | CHF 625'000 |
Patent-Related Expenses | CHF 500'000 | 28% | CHF 140'000 |
Subtotal: Credit for Basel-Stadt located employees | CHF 765'000 | ||
Standard expenses for employees located in Baselland | CHF 500'000 | 2.5%* | CHF 12'500 |
Subtotal: Credit for Baselland located employees | CHF 12'500 | ||
Total Credit for Personnel Expenses | CHF 777'500 | ||
R&D Asset Depreciation | |||
Standard R&D Asset depreciation (Basel-Stadt) | CHF 750'000 | 25% | CHF 162'500 |
Total Credit for R&D Asset Depreciation | CHF 162’500 | ||
Clinical Trial Costs | |||
Clinical Trial Costs | CHF 1'500'000 | 10% | CHF 150'000 |
Total Credit for Clinical Trial Costs | CHF 150'000 | ||
Aggregate Basel Innovation Credit | CHF 1'090'000 | ||
In this example the "cap" of twice the Basel-Stadt credit for expenses outside the canton is not relevant as the Baselland personnel expenses are significantly lower. If the total credits requested exceed available funds, proportional reductions will apply. Please seek professional advice for your specific circumstances.
* Blog updated after initial uncertainty whether also companies with a limited audit would be accepted into the program.
Authors: Pauline Pfirter, Vincent Reardon, Luzius Zumstein
