With the OECD's minimum taxation framework (Pillar Two) now in place, Swiss Cantons are moving from tax-based incentives to direct, outcome-focused funding. The Canton of Zug is leading the way with the Location Development Act (Gesetz über Standortentwicklung, GSE), introducing new subsidies and tax credits to drive innovation and measurable sustainability outcomes. From 2026, eligible companies can access funding to cut greenhouse gas emissions, paving the way for regional growth.
Background
Zug is reinforcing its status as a hub for innovative, sustainability-driven businesses with new cantonal subsidies and tax credits under the Location Development Act (GSE). These initiatives support companies in their sustainability and innovation journeys. Zug plans to channel an estimated CHF 200 million in additional net tax revenues annually into three key areas: social measures, infrastructure and innovation projects, and targeted sustainability and innovation funding. This blogpost highlights outcome-based sustainability funding.
Zug’s New Subsidy Mechanisms
Following voter approval of the Location Development Act, Zug's government released the final ordinance, "Vollziehungsverordnung zum Gesetz über Standortentwicklung" (SEVO), on 12 December 2025. Effective from 1 January 2026, this ordinance sets the legal framework for the new subsidy mechanism. It defines two funding pillars: cost-based innovation funding and outcome-based sustainability funding.
The sustainability focus is on reducing upstream greenhouse gas emissions. Companies achieving measurable reductions in Scope 3, Category 1 emissions ('Purchased Goods and Services') as per the Greenhouse Gas Protocol can access targeted subsidies. This approach rewards real emission reductions along the value chain, not offsets or compensatory tools.
Cost-based innovation funding
Cost-based innovation funding supports basic or applied industrial research or experimental developments. These activities aim to acquire fundamental knowledge without a clear commercial idea or create scientific or technical knowledge for practical use. This includes product development or production process improvements.
Experimental development is also supported when based on scientific or technical knowledge to produce new or improved products, materials, processes, systems, or services.
Activities related to developing, acquiring, improving, maintaining, protecting, and exploiting intangible assets and comparable rights are also considered and intertwined with the research or development process. The assessment basis for calculating the cost-based funding contribution consists of personnel expenses for qualifying innovative activities and expenses for conducting clinical studies in Switzerland.
Outcome-based sustainability funding
Available from 2026 to 2028, sustainability funding is open to all companies domiciled or operating in Zug if they meet these criteria:
- Reduce the emissions intensity of purchased goods and services.
- Achieve a reduction of at least 50,000 tons of COâ‚‚-equivalent emissions without using offsets or similar compensation instruments.
These impact metrics must be disclosed through industry-standard performance indicators within the framework of non-financial reporting. Additionally, the reported data must be verified by a state-supervised audit firm (e.g., FOAO in Switzerland).
The funding amounts up to CHF 30 per ton of COâ‚‚-equivalent emissions saved annually, with a minimum funding threshold of CHF 7,500 per company per year. The maximum annual funding budget is set at CHF 150 million. Should total applications exceed this amount, subsidies will be reduced proportionally across all approved applicants. However, reduced contributions below the minimum threshold will still be granted.
The importance of Robust Non-Financial Reporting and Financial Information
To secure sustainability-related subsidies, applicants must submit non-financial reports based on industry-standard impact indicators assured by a licensed audit firm. Specifically, category 1 Scope 3 GHG emissions must be calculated in accordance with the GHG protocol standard. In practice, many companies will need to:
- Enhance data quality and traceability in Scope 3 emissions (especially Scope 3, category 1 emissions).
- Improve the consistency between sustainability disclosures and statutory financial reporting.
- Calculate and disclose Scope 3 emissions.
- Engage a licensed audit firm to audit the Scope 3 emissions and provide an assurance report with a limited assurance opinion.
Such improvements not only strengthen subsidy applications but also support broader compliance and transparency goals. By partnering with assurance experts, companies can confirm their non-financial reporting meets the standards expected by cantonal authorities, laying a strong foundation for successful subsidy applications. An added benefit of these improvements is the potential to embark on broader business transformation projects, such as when measurable reductions stem from product innovation—like using bio-based instead of fossil-based materials—or introduce elements from the circular economy or changes in logistics, such as reverse logistics or e-mobility.
The basis for calculating the cost-based innovation funding are the personnel expenses for individual projects or developments derived from documentation in the cost accounting, which provides the necessary detailed information for funding decisions and verification.
Application Process and Key Timelines
Applications for sustainability funding open on 1 March 2026, with a submission deadline of 31 May 2026. Submissions must be based on 2024 financial statements.
Given the documentation and verification requirements, early preparation is highly recommended. Companies that start reviewing their data and reporting structures early will be better positioned to meet deadlines and enhance their chances of grant approval.
Currently, it's unclear what exactly must be submitted with the application to the cantonal authorities and how detailed the assurance report by the approved audit firm must be. More details are expected in the coming weeks.
Next Steps for Zug-Based Firms
To fully leverage the new cantonal subsidies and tax credits, Zug-based companies should:
- Review their 2024 financial and non-financial statements (and potentially cost accounting details) and their Scope 3 category 1 emissions to identify qualifying innovation and sustainability activities.
- Collaborate with PwC assurance professionals to conduct non-audit assurance engagements of the relevant non-financial disclosures.
- Prepare and submit applications between 1 March 2026 and 31 May 2026, ensuring all documentation meets the requirements set by the Zug cantonal government.
Contact and Support - Assurance
For more information about assurance aspects of the development act, please reach out to our dedicated assurance specialists listed in the contact details below.
Contact and Support - Tax
For more information about tax aspects of the development act, please reach out to our dedicated tax specialists listed in the contact details below.
