From sports clubs to theatre associations, to garden associations: Switzerland boasts an estimated 100,000 associations of all kinds. What they have in common is that they pursue an idealistic purpose and operate on a non-profit basis. However, associations are free to be economically active while pursuing their idealistic purpose. Associations are allowed to sell food and drink at association events, for example. The prerequisite for this is that they must be entered in the commercial register. But do associations also have to pay taxes? The short answer is yes, except … This article tells you everything you need to know about “associations and taxes”.
Do associations have to pay taxes in Switzerland?
Whether small or large, non-profit or politically active: in Switzerland, all associations are obliged to keep accounts. But which rules actually apply when it comes to paying taxes? Let us explain.
What do associations have in common: What does non-profit mean?
Associations pursuing non-profit goals are not concerned with achieving a financial advantage for themselves, their members or related parties. Non-profit goals may include, for example, political, religious and charitable goals, or activities in support of children and young people.
When founding a association, providing a description of the association’s purpose is one of the most important tasks.
Find out more about formulating the purpose of an association in our business blog post “So you want to found an association? Here are the key things you should do”.
Which associations are subject to tax?
Regardless of whether associations are registered in the commercial register, all associations are generally liable to pay tax to the municipality, the canton and the Confederation, and must pay tax on profits and assets. Tax is payable at the location of the association’s registered headquarters.
How much are the taxes?
The Confederation taxes profits in excess of CHF 5,000. Please refer to the websites of the cantonal tax offices for information on the taxation limits or tax exemption limits of the corresponding canton and municipality.
In which cases can associations be exempted from tax?
Associations may be exempted from taxes in full or in part upon request based on their charitable, public or cultural status. The cantonal tax authority is responsible for tax exemption. Whether and to what extent the association is exempt from tax must be clarified with the tax office. A tax exemption is granted without restriction – if necessary with conditions – but can be reassessed.
Useful to know
A purpose is recognized as non-profit if the association’s activities are directed mainly towards the welfare of other persons and do not serve to benefit of the association’s own members.
Does any tax exemption also apply to VAT?
Any liability for VAT does not cease to apply due to a tax exemption. Associations must pay VAT if they generate revenue in excess of CHF 100,000. For non-profit and volunteer-run associations as well as sports and cultural associations, the limit is CHF 150,000.
Are eligible associations automatically exempt from taxes?
No, to obtain a tax exemption, associations must take action themselves and submit a request to the cantonal tax authorities.
Do membership fees also count as taxable profit?
While income from public events (e.g. concerts or catering services), gross income from real estate, general operating profits and financial income are considered taxable income, membership fees are not counted as taxable profit. The latter applies if:
- The fees are mainly paid by association members
- Members of the same category pay the same contribution
- The association does not provide any direct benefit in return and does not promote any personal interests
- The obligation to pay is provided for in the articles of association
Find out more about this topic in the blog post “Collecting payments for an association: how the Winterthur Archers use TWINT”.
Are associations obliged to keep accounts?
By law, every association in Switzerland is obliged to keep records of its income, expenditure and assets. Whether single-entry or double-entry bookkeeping (see box below) is required depends on whether the association is listed in the commercial register.
The difference between single-entry and double-entry bookkeeping
Single-entry bookkeeping is a more simple form of bookkeeping that shows the profit or loss of the association. It only requires that income, expenditure and assets be recorded in chronological order. With double-entry bookkeeping, on the other hand, every income or expenditure must be entered twice and posted in terms of “debit against credit”. This means the financial results of the association are represented in two ways: The balance sheet shows how equity capital has changed, while the income statement shows whether a profit or loss has occurred.
Find out more in the blog article “Association management – which tasks can a software package for associations provide support with?”.
Useful to know
A tax-exempt association does not need to fill in a tax return. However, some cantons require the submission of annual accounts.