Depreciation and provisions
Business expenses can be deducted from revenue. However, investments in cars, equipment, and real Business expenses are deductible from revenue received under certain conditions. Capital investments like cars, equipment, and real estate cannot be deducted in full in the first year or in the purchase year. Such expense can therefore only be charged on depreciation over several years. Depreciation rates vary from 3% to 45% annually. Costs associated with the purchase of motor vehicles and computers are chargeable in the corresponding fiscal year in their entirety. This also applies to the annual leasing fees.
Provisions can be made for associated business risks such as imminent litigation costs and defaulting debtors in the following manner:
Highly vulnerable claims may be fully deferred;
All other domestic claims are subject to a flat-rate value adjustment of 5%;
On foreign claims the flat-rate value goes up to 10%;
Individual cantons even allow the 10% deduction in practice on the total amount of outstanding invoices.
Losses incurred from business activities are deductible from 7 previous assessment periods at both federal and cantonal levels.
Differentiation in regards to private expenses
Self-employed persons can get deductions on business-related expenses provided they can support their claims via appropriate documentation. When paying taxes as a self-employed individual it is therefore important to make a clear demarcation between private expenses and business expenses for this purpose.
The correct demarcation of private and business expenses must also be applied to the following expenses:
Business trips, which are accepted as expenses for tax purposes. Travel for personal purposes cannot be deducted.
Company cars, which are also used privately.
Rental units, if the owner also lives in the commercial property. Rental costs, which are not in line with the market, are calculated by the tax authorities.
Hotel, restaurant and travel expenses: purpose and the names of invited business partners are to be proven.
Professional clothes: it is possible to claim clothes used exclusively for work for tax purposes, such as uniform or special attire. Items such as classic suits and ties are exempted on the basis that they can be for use at private events.
Further education: in-depth specialist courses are business-related expenses, as well as technical literature. However, classes or workshops taken upon as hobbies are not considered business expenses and can’t be deducted.
Premiums and fees: insurance premiums, telephone tuition, license fees for radio and television, lawyer's fees, wages for temporary staff, etc. are to be broken down into private and business expenses as well.
Treatment of wages and salaries