Basically, all legal entities, all partnerships and all individual companies are in principle obliged to bookkeeping. However, there are also deviating exceptions and special cases of this principle.
The Swiss Bookkeeping and Accounting Law
Since 1 January 2015, new rules have been introduced regarding corporate bookkeeping and accounting. These must be adhered to by all the companies concerned. Since that date, all partnerships, legal entities and sole proprietors are required to keep accounts, even if they are not registered in the commercial register. The new law came into force on January 1, 2013, and started being applied from January 1, 2015. Under the Code of Obligations, all partnerships, legal entities and individual companies are now subject to accounting.
For which companies does the bookkeeping obligation apply?
Every entrepreneur who runs a business has to manage it according to certain commercial aspects, and they are also responsible for the bookkeeping. After all, the company is supposed to generate profits and is run for profit-making purposes. The entry in the commercial register is mandatory for a sole proprietorship with an annual turnover of at least CHF 100,000, says the Commercial Register Ordinance in Article 36. However, this entry in the commercial register does not affect the obligation to maintain records and accounts.
Which types of companies are affected?
Limited partnerships and collective companies are the partnerships affected by the obligation to maintain records. Foundations, associations, cooperatives, limited partnerships, GmbHs and AGs are legal entities that are affected by the accounting obligation. If foundations and associations are not obliged to register in the commercial register, they can make do with simplified bookkeeping, but for bookkeeping companies, on the other hand, the duty to double bookkeeping applies.
Who is allowed to do simplified bookkeeping?
If a partnership or a sole proprietorship generates less than CHF 500,000 turnovers per year, simple bookkeeping is allowed. This also applies to associations and foundations if they are not obliged to enter the commercial register. This simplified bookkeeping must list the income and expenditures clearly so that the net worth situation is evident at a glance. But even if simple bookkeeping is allowed, it must be managed systematically, fully and truthful.
Bookkeeping for commercial companies
The Code of Obligations defines ordinary bookkeeping. It includes an inventory, a complete balance sheet and a profit and loss account.
In Switzerland, the following types of companies are required to comply with the rules defined in the Swiss Code of Obligations:
- Legal entities (AGs, GmbHs, limited partnerships, cooperatives, associations and foundations);
- Individual companies and partnerships (collective and limited partnerships), which generated sales of at least CHF 500,000 in the last financial year;
- Individual companies and partnerships whose turnover is less than CHF 500,000 must at least maintain a simplified bookkeeping system that only includes income, expenses and net worth.
The obligation to maintain accounts in particular means that an inventory, as well as a complete balance sheet and a profit and loss account with all supporting documents, must be prepared.
The records and reports associated with the company's bookkeeping must be maintained for at least ten years Special provisions also apply to documents that are stored electronically or in a comparable manner.
Data for the closure of the financial year
As a rule, a financial year comprises twelve months and corresponds to the calendar year (January 1 to December 31). If necessary, however, the entrepreneur may choose a different date for completion.
In the first year after the Swiss company formation has been completed, the entrepreneur can choose between a short year ending at the end of the first tax year and a long year ending at the end of the following tax year. For example, if the incorporation falls on 1 July and the annual accounts on 31 December, the duration of the first financial year may be set at either 6 or 18 months. The maximum duration of the first financial year in some cantons is 23 months while in others it’s 15 months. Cantonal tax law determines how long the first financial year may last.
Since high expenses are incurred in the first financial year, a long financial year may be the better choice in cantons that don't have a standard tax rate on corporate profits. This practice brings tax advantages because the high initial costs can be offset against the later accumulating profits.
For more information regarding bookkeeping requirements in Switzerland, or to acquire our bookkeeping services in Switzerland, please contact our experts in this field.