Some companies are not taxable as such. This is the case of general and limited partnerships as well as sole proprietorships.
General partnerships, limited partnerships and sole proprietorships are not taxable as such because they are not legal entities. Each private entrepreneur and each partner in general and limited partnerships is taxable on his or her private and business income, and on his or her private and business assets, which cannot be separated.
For individual entrepreneurs and partners in partnerships, income is made up of all remunerations received from the business (profit, salary, interest) along with other income.
As individuals, they have to pay federal, cantonal and communal tax. However, the company's production costs and any losses may be deducted from income. Individual entrepreneurs or partners in partnerships may not deduct the federal or cantonal taxes that they pay from their taxable net profit. Conversely, this is possible for share capital companies.
The private and business assets of individual entrepreneurs and partners in partnerships are only liable to cantonal and communal taxes, but not federal direct tax. This is also the case for joint and general partnerships: partners pay taxes on their share of income and assets.
Amortization: Expenses incurred for the business may be deducted from income. Sums invested in vehicles, equipment and buildings may not however be amortized in full during the first year or the year of acquisition. These investments may only be deducted from expenses in the form of amortization distributed over more than one year. Amortization rates vary from 3% to 45% per year.
If, instead of buying, you lease a vehicle or computer, you may deduct all costs or the annual leasing costs for the corresponding year.
The provisions below can be set up for future risks (e.g. a bad payer, potential lawsuit costs, indemnity payments falling due, etc.):
- very uncertain debts may be carried forward in full;
- companies have the option of applying a 5% valuation adjustment on all other Swiss debts;
- for foreign debts, up to 10% is allowed;
- in practice, some cantons even allow a deduction of 10% on all invoices.
Losses: The Confederation and cantons allow justified business losses to be deducted for up to seven previous calculation periods.
Definition of personal expenses
An important point for self-employed persons who still pay income tax as individuals: personal and business expenses must be clearly separate. Private boats or cars cannot be paid for by the company if they are solely for personal use. Nor may children be cared for by an apprentice or a private wine cellar be filled at the company's expense.
In principle, self-employed persons may deduct anything justified by commercial practices. Receipts must be presented for all deductible expenses.
Personal and business expenses must also be defined in the following areas:
- Business travel accepted as expenses for tax purposes. Exclusively personal travel cannot be deducted.
- Company vehicles also used privately.
- Share in rent for which the owner has paid to live on the business premises. Leasing expenses which do not conform to the market are offset by the Federal Tax Administration.
- Board, lodging and travel expenses: specify purpose and names of guest business partners.
- Work clothing: work clothing may be declared for tax purposes. However, suits and ties are not work clothing, because they can both be worn in private.
- In-house training: courses to increase knowledge and specialized magazines are business expenses. But amateur cooking courses or TV programs are not.
- Premiums and taxes: insurance premiums, telephone costs, radio and television fees, lawyers’ fees and salaries paid to temporary assistants must also be divided between private and business expenses.
