Zug Approved Sustainability and R&D Incentives in Referendum Vote

Following the cantons of Basel-City and Grisons, the canton of Zug - another key business hub in Switzerland - has also decided in a referendum last weekend to introduce new Pillar 2-compliant incentives. These incentives focus on government grants and tax credits aimed at promoting sustainability and innovation, in line with the OECD Model Rules.

Zug is widely recognized as one of the most attractive business and residential locations both nationally and internationally. Its leading position is largely due to its business-friendly policies, which draw local, national, and international companies alike. The canton plans to strengthen the business location through new initiatives benefiting both the population and the economy. These include projects for childcare, housing, infrastructure, and innovation, alongside targeted funding for companies focused on sustainability and innovation.

Funding for Companies

The citizens of Zug approved this comprehensive package in a referendum vote last weekend. Under a new Location Development Act, the canton will allocate CHF 150 million annually from 2026 to 2028 to support companies. From 2029 onwards, the government will reassess and redefine the maximum annual funding amount. Should applications exceed available funds, allocations will be proportionally reduced.

Funding is open to all companies and covers the following areas:

• Sustainability: Significant reduction of greenhouse gas emissions within supply chains for purchased goods and services (scope 3.1 emissions).
  Example: A commodity trader in Zug sourcing oil from producers with lower-emission facilities.
• Input Innovation: Support for basic research, applied industrial research, and experimental development.
  Example: A pharmaceutical company in Zug conducting basic research on new cancer treatments.
  
• Output Innovation: Income generated from patents, software, trademark rights, and other intangible assets (to be introduced only if permitted by international regulations).

Given the rapidly evolving regulatory landscape for such funding, Zug has adopted a two-tiered approach: the Location Development Act sets out the core principles and objectives, while detailed regulations - including funding criteria, calculation methods, and procedures - will be established through an ordinance. This ordinance can be swiftly updated by the cantonal government to stay aligned with international developments. The act takes effect on 1 January 2026, allowing funding disbursements to begin in the 2026 calendar year. Further details are expected from the canton early next year.

Deloitte’s View

Following Basel-City and Grisons, Zug’s introduction of new Pillar 2-compliant incentives marks a significant step for Swiss business locations. As international acceptance of these instruments remains critical, several details are still pending clarification, which Deloitte anticipates will be resolved in early 2026. Meanwhile, the canton of Lucerne is currently considering a legislative package, with a referendum planned for October 2026. Other cantons, including Geneva and Vaud, may soon announce similar initiatives.

Switzerland is clearly signaling its commitment to remaining an attractive business destination in a post-Pillar 2 environment, with international endorsement of these incentives being paramount. For more detailed information on the status of Pillar Two incentives across Swiss cantons, please refer to our Pillar Two Incentives Guide Switzerland.