Zug Corporate Income Tax
Last updated: 13 Dec 2025
Zug Corporate Income Tax — Profit Tax Rules
How corporate income tax works in the Canton of Zug: who is subject to profit tax, how the tax base is determined from accounting profit, how cantonal, communal and federal components interact, and what to know about participation relief, Zug’s STAF instruments and loss carryforwards.
Scope & Taxpayers
- Resident companies. Companies with statutory seat or effective place of management in Zug are subject to unlimited tax liability on their worldwide income, subject to relief for foreign permanent establishments and immovable property under double tax treaties and intercantonal rules.
- Nonresident entities. Nonresident companies are limited tax liable in Zug if they have local business operations, a permanent establishment, or Zug–situs real estate. Only the profits attributable to the Zug nexus are taxed.
- Juristic persons only. The corporate income tax described here applies to juristische Personen (AG, GmbH, cooperative, certain foundations and associations). Partnerships and sole proprietors are taxed at shareholder/owner level under personal income tax.
- Tax period. The profit tax period for juristic persons generally follows the financial year. A change of year-end or an extended first business year must be coordinated with the Zug tax administration.
Tax Base: From Accounting Profit to Taxable Profit
Zug corporate income tax is levied on the company’s taxable profit, determined by starting from statutory financial statements (usually Swiss GAAP / OR, sometimes Swiss GAAP FER or IFRS for groups) and then making tax adjustments.
| Step | Description | Typical adjustments |
|---|---|---|
| 1. Accounting profit | Profit after tax per statutory financial statements for the relevant business year. | Profit as approved by the shareholders’ meeting, before appropriation of retained earnings. |
| 2. Add-backs | Non-deductible or partially deductible expenses are added back to profit. | Hidden profit distributions; excessive interest or royalties to related parties; non-business expenses; penalties; corporate income tax itself; provisions and value adjustments that are not commercially justified. |
| 3. Deductions | Items that are tax deductible but not expensed, or expensed differently, are deducted. | Tax-allowed depreciation exceeding accounting depreciation (within limits); specific provisions; participation relief; Zug STAF instruments such as patent box adjustments and the R&D super-deduction where applicable. |
| 4. Allocation & exemptions | Profits allocable to other cantons or foreign permanent establishments are exempt in Zug under intercantonal and treaty rules. | Profit/loss attribution keys; separate determination of foreign PE income; treaty exemptions or credit methods. |
| 5. Taxable profit | Result after adjustments, before loss carryforwards and special reliefs. | Loss carryforwards of up to 7 years can be offset against current-year taxable profit (subject to general Swiss rules). |
The Zug tax book and cantonal practice notes provide detailed guidance on depreciation, provisions, hidden equity, participation relief and other adjustments relevant for the tax base. In practice, a clear reconciliation from accounting profit to taxable profit is expected as part of the Zug corporate tax return.
Rates & Effective Burden
Cantonal & communal profit tax
Zug is one of Switzerland’s classic low-tax cantons for companies. For capital companies and cooperatives, the ordinary cantonal and communal profit tax is calibrated so that the combined burden including direct federal tax is around the high 11% range.
Official location marketing and cantonal information state that the total regular rate of taxation on company earnings in Zug is currently about 11.8% of profit before tax (combined cantonal, communal and federal tax). Independent 2025 surveys quote a very similar rate of around 11.85%, again confirming Zug as the lowest-tax canton for corporate earnings in Switzerland (before any special regimes).
Within the canton, the combined profit tax rate is very similar between key business locations such as the City of Zug and Baar. In recent overviews, both municipalities are quoted with a combined corporate income tax rate of 11.8% (before church tax and rounding effects).
For up-to-date Zug profit tax burdens and municipality-specific factors, see the Rates page and the official Zug company tax calculator .
Federal corporate income tax
In addition to cantonal/communal profit tax, companies pay Swiss direct federal corporate income tax at a flat rate of 8.5% on profit after tax. Because federal tax itself is deductible, this corresponds to an effective rate of about 7.8% on profit before tax.
The combined effective corporate income tax rate for a Zug company is therefore the sum of:
- Cantonal/communal profit tax (set at a low level by Zug for location competitiveness); and
- Direct federal corporate income tax.
The Zug tax calculator on this hub allows you to model combined cantonal, communal and federal profit tax for a given level of taxable profit and municipality.
Participation Relief & STAF Measures
Zug follows federal rules for participation relief and has implemented the full STAF (Swiss corporate tax reform and AHV financing) toolkit, including a generous patent box and a 50% R&D super-deduction, subject to an overall relief cap.
| Mechanism | Overview | Typical planning aspects |
|---|---|---|
| Participation relief | Qualifying dividends and capital gains from shareholdings in subsidiaries are effectively subject to reduced taxation via a deduction calculated on the basis of net participation income relative to total profit (federal and Zug rules). | Minimum shareholding thresholds (e.g. 10% or CHF 1m market value); holding period; treatment of write-downs and liquidation proceeds; interaction with foreign withholding tax, treaty relief and Zug allocation rules. |
| Patent box | Under Zug’s patent box rules, income from qualifying intellectual property (patents and comparable rights) that is based on qualifying R&D expenditure can benefit from a 90% reduction at cantonal level. Only 10% of the qualifying net patent income is included in the Zug profit tax base, subject to OECD nexus requirements and tracking of R&D expenditure. | Segregation of IP income and expenses; nexus documentation; managing entry costs into the box; coordination of Zug patent box calculations with group transfer pricing and global minimum tax (Pillar 2). |
| R&D super-deduction | Zug grants an additional deduction of up to 50% on certain qualifying R&D expenditure, on top of ordinary deductibility. The basis generally includes in-house R&D personnel costs plus a mark-up and a portion of third-party R&D costs, in line with federal STAF parameters. | Defining qualifying R&D versus routine activities; allocation between in-house and outsourced projects; ensuring that the Zug F&E-Zusatzabzug is aligned with internal cost accounting and transfer pricing; preparing documentation so the additional 50% deduction can be claimed robustly year-on-year. |
| Notional interest deduction (NID) | Zug has not introduced a cantonal notional interest deduction on equity. The canton relies on the combination of a very low ordinary profit tax rate, patent box and R&D super-deduction instead. | Financing optimisation focuses on traditional debt/equity structuring, thin-capitalisation limits and the interaction with participation relief and the patent box rather than NID planning. |
| Relief cap | The combined relief from patent box, R&D super-deduction and step-up amortisations is subject to a maximum relief cap of 70% at cantonal level: at least 30% of the relevant profit must remain taxable at ordinary rates. | For larger structures, it is important to model the interaction between participation relief, patent box, R&D super-deduction and the 70% cap. Advance tax rulings are standard for major Zug IP and R&D setups. |
Because Zug combines a low ordinary profit tax rate with strong STAF instruments (90% patent box, 50% R&D super-deduction, 70% relief cap), the canton is particularly attractive for innovative, IP-rich and R&D-intensive business models as well as for international holding and financing structures.
Losses, Groups & Permanent Establishments
- Loss carryforwards. Tax losses can generally be carried forward for up to 7 years and offset against future taxable profits in Zug, within the standard Swiss framework. Loss carryback is not available.
- Group situation. Switzerland has no fiscal unity or tax consolidation for ordinary corporate income tax. Each Zug legal entity files its own return; group effects are managed via financing, transfer pricing, participation relief, and use of patent box and R&D deduction where relevant.
- Intercantonal allocation. Where a company has operations, real estate or permanent establishments in several cantons, profit and capital are allocated using generally accepted keys (e.g. payroll, assets, turnover) based on Zug practice and federal jurisprudence.
- Foreign permanent establishments. Under many treaties, profits attributable to foreign permanent establishments are exempt in Switzerland with progression. Accurate attribution of profits and capital is essential to support the exemption at Zug and federal level.
- Restructurings. Mergers, de-mergers, contributions in kind and migrations of seat can be tax neutral if Swiss conditions are met (continuity of business, carryover of hidden reserves, adequate consideration, etc.). Rulings are frequently used to secure treatment for Zug and federal purposes, especially where several cantons or countries are involved or where STAF instruments are applied.
Interaction with Capital Tax
Corporate income tax and capital tax are closely linked in Zug, but capital tax is kept at a very competitive level.
- Zug applies a uniform capital tax rate of 0.5‰ of taxable equity (0.05%) at cantonal level, combined with municipal components that result in an effective capital tax burden of roughly 0.05–0.07% per year in key business municipalities such as the City of Zug and Baar.
- The Zug capital tax base is significantly reduced for qualifying participations, patent box-eligible IP rights and certain intragroup loans. For these elements, very low effective capital tax rates apply, which is particularly attractive for holding and treasury structures.
- At the same time, higher equity reduces thin-capitalisation risk and supports participation and IP structures that benefit from the patent box and participation relief. For many profitable operating companies, profit tax rather than capital tax is the dominant element of the overall Zug tax burden.
- For details on capital tax rates, base reductions and examples of combined profit and capital tax burdens, see the Zug capital tax page and the combined tax calculator.
Compliance Snapshot
This guide focuses on the substantive rules for corporate income tax in Zug. For procedural aspects — who files, which forms to use and which deadlines apply — see the dedicated Forms & deadlines page.
| Area | Key points |
|---|---|
| Filing | Annual corporate tax return for juristic persons, typically using the electronic tax return tools and calculators provided by the Zug tax administration. Profit tax and capital tax are assessed together. |
| Deadline | Ordinarily around six months after year-end; extensions are commonly available on request (via Zug’s online or written extension procedure; beyond that by special request or via advisers). |
| Documentation | Signed financial statements; profit-to-tax reconciliation; schedules for participation relief, patent box and R&D deduction; transfer pricing documentation where relevant; intercantonal and international allocation workings. |
| Assessments & objections | Combined assessments for cantonal, communal and federal tax; objection rights and deadlines set out in the assessment notice. For complex cases, structured responses and, where appropriate, follow-up discussions with the Zug tax administration are common. |
FAQs
How high is the corporate income tax rate in Zug?
Zug is one of the lowest-tax cantons for companies in Switzerland. Location marketing and cantonal information state that the total regular rate of taxation on company earnings is about 11.8% (combined cantonal, communal and federal tax, before church tax). Independent surveys for 2025 quote a very similar combined rate of around 11.8–11.9%, confirming Zug’s position at the top of Swiss competitiveness rankings.
What STAF instruments does Zug offer for companies?
Zug has implemented a patent box with 90% relief on qualifying net patent income and a 50% R&D super-deduction on certain qualifying R&D expenditure, in addition to the standard participation relief. All reliefs (patent box, R&D super-deduction and transitional step-up items) are subject to a relief cap of 70%, so at least 30% of the relevant profit remains taxable at ordinary rates. There is no notional interest deduction on equity.
How does capital tax work for companies in Zug?
Zug levies a uniform capital tax rate of 0.5‰ of taxable equity (0.05%) at cantonal level, with municipal components leading to an effective burden of roughly 0.05–0.07% in key locations such as the City of Zug and Baar. The capital tax base is reduced for qualifying participations, patent box-eligible IP and certain intragroup loans, which can substantially reduce the effective capital tax burden for holding and financing structures.
Are dividends from subsidiaries fully taxed in Zug?
Qualifying participations can benefit from participation relief at federal and cantonal level. This mechanism reduces the effective tax burden on net participation income (dividends and certain capital gains) based on a formula comparing participation income to total profit. Where the conditions are met, the effective Zug and federal tax on qualifying dividends can be reduced significantly, often to a low single-digit effective rate.
How are losses treated for Zug corporate income tax?
Tax losses can generally be carried forward for up to seven years and offset against future taxable profits. There is no loss carryback. In restructurings or changes of ownership, special Swiss rules may limit the use of losses; advance tax rulings are often used where material loss carryforwards are involved and Zug is an important canton in the group structure.
Can I get a ruling on a planned structure or transaction in Zug?
Yes. Zug, like other Swiss cantons, offers advance tax rulings. These are commonly used for holding and financing structures, IP arrangements (including patent box), application of the R&D deduction, reorganisations and relocations. A well-prepared ruling request can provide valuable certainty on the corporate income tax treatment and its interaction with capital tax and federal tax.
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