Taxes / tax exemption

Question

Can an association issue a donation receipt for tax purposes or are there specific requirements in place for this?

Answer

An association is only permitted to issue receipts if the association is tax-exempt. This means that the association must have submitted a corresponding application to the canton in which it is based and must have a written document that confirms it enjoys tax-exempt status due to its charitable activities.

If the association is really tax-exempt, the form that the donation receipt takes plays no role. The association is under no obligation to issue a receipt.  Donors are happy, however, if they are able to directly enclose a donation receipt with their tax return. It is important that the organisation, the name of the donor and the relevant amount are stated on the confirmation.

The cantonal tax laws allow for deducting donations made as grants to recognised charitable and tax-exempt organisations to varying degrees. The regulations vary from canton to canton. Information can be obtained from the cantonal tax offices. When it comes to asking for donations, it is worth to point out the possibility of tax deductions.

Associations that are exempt from tax due to their charitable status can issue donation receipts to their donors on their own initiative – or at their donors’ request – for the donor’s tax return. There are no regulations regarding their content and form. The important points to be specified are the receiving organisation, the name of the donor and the amount of the donation. The donation receipt may also be used for thanking the donors and for promoting member relations. Of course, associations that are not tax-exempt can also express their gratitude for having received donations, but not in the form of a receipt for deductible donations.

Question

How can our association be exempted from tax?

Answer

As a rule, there is no "automatic" tax exemption for associations. Applications for tax-exemption based on the association's non-profit status must be submitted to the cantonal tax administrations. These will also provide information on the relevant conditions and accept written applications for tax-exemption. The articles of association, foundation protocol, annual financial statements and other documents concerning the association's activities must be enclosed with the application. The articles of association should provide information on the charitable, social, cultural, etc. purpose of the association. The association's purpose must not exclusively benefit its own members (no self-help organisations) and the committee members must, as a rule, perform their role on an unpaid basis.

Upon the dissolution of the association, the liquidation proceeds must go to another tax-exempt association. Tax-exemption does not rule out a possible obligation to pay VAT!

See the work aid "Tax exemption for associations".

Associations are recognised as non-profit organisations if their activities are mainly directed towards improving the welfare of third parties and do not serve the members’ own benefit. Upon application, non-profit associations may request tax exemption from the cantonal tax authorities. Self-help organisations, professional associations or sports and leisure clubs are not “non-profit” as defined by fiscal legislation. The Zewo quality seal for charity organisations is awarded only to associations with a charitable purpose.

As a principle, associations are subject to taxation. However, upon application, associations may be fully or partially exempted from taxes if they pursue altruistic or public purposes. The cantonal tax office is responsible for tax exemptions. In accordance with cantonal regulations, donations to tax-exempt associations can be deducted from taxes. However, the tax exemption applies only to federal and state taxes, not to value added tax (VAT).

Question

How can our association be exempted from tax?

Answer

As a rule, there is no "automatic" tax exemption for associations. Applications for tax-exemption based on the association's non-profit status must be submitted to the cantonal tax administrations. These will also provide information on the relevant conditions and accept written applications for tax-exemption. The articles of association, foundation protocol, annual financial statements and other documents concerning the association's activities must be enclosed with the application. The articles of association should provide information on the charitable, social, cultural, etc. purpose of the association. The association's purpose must not exclusively benefit its own members (no self-help organisations) and the committee members must, as a rule, perform their role on an unpaid basis.

Upon the dissolution of the association, the liquidation proceeds must go to another tax-exempt association. Tax-exemption does not rule out a possible obligation to pay VAT!

See the work aid "Tax exemption for associations".

The ZEWO Foundation awards a quality seal of approval for non-profit organisations, which gives them greater credibility with donors. Recognition by the ZEWO Foundation requires complying with exacting standards in a paid procedure and having the assessment repeated periodically.

Question

Can an association issue a donation receipt for tax purposes or are there specific requirements in place for this?

Answer

An association is only permitted to issue receipts if the association is tax-exempt. This means that the association must have submitted a corresponding application to the canton in which it is based and must have a written document that confirms it enjoys tax-exempt status due to its charitable activities.

If the association is really tax-exempt, the form that the donation receipt takes plays no role. The association is under no obligation to issue a receipt.  Donors are happy, however, if they are able to directly enclose a donation receipt with their tax return. It is important that the organisation, the name of the donor and the relevant amount are stated on the confirmation.

Question

Our association is tax-exempt. We have now amended the association's purpose in our articles of association and also made further additions. Do we need to send the new articles of association to the tax authority?

Answer

Changes to an association's articles of association that include points that may have an impact on its tax-exempt status must always be notified to the tax administration. Such amendments include, in particular, the association's purpose, the unpaid work of the committee and the allocation of funds in the event of the association's liquidation. It is also important to inform the tax authority about any name changes. Enquire directly with your tax authority if you are unsure.

The cantonal tax laws allow for deducting donations made as grants to recognised charitable and tax-exempt organisations to varying degrees. The regulations vary from canton to canton. Information can be obtained from the cantonal tax offices. When it comes to asking for donations, it is worth to point out the possibility of tax deductions.

Question

Are committee members generally entitled to compensation for the performance of their committee function?

Answer

There is no legal entitlement to compensation for committee members. On the contrary: an important condition for the association's tax-exempt status is that committee members perform their role on an unpaid basis. They are, of course, entitled to the payment of any expenses incurred. Compensation can be provided for special professional tasks but this should always be linked to specifically described and limited assignments.

All compensation paid to the committee must be included in the budget and be reported as such in the accounts. Always bear in mind that other forms of recognition are possible, including the option to complete further training, the waiving of membership fees and the provision of extras.

And it is also important to note that recipients of compensation that goes beyond an expenses allowance must also pay tax on the relevant amount, meaning that the association is required to prepare a salary statement. If the compensation totals more than CHF 2300 per person per year, the relevant social insurance contributions must also be settled (see the work aid "Expenses, expense regulations, compensation" in this regard).

Associations that are exempt from tax due to their charitable status can issue donation receipts to their donors on their own initiative – or at their donors’ request – for the donor’s tax return. There are no regulations regarding their content and form. The important points to be specified are the receiving organisation, the name of the donor and the amount of the donation. The donation receipt may also be used for thanking the donors and for promoting member relations. Of course, associations that are not tax-exempt can also express their gratitude for having received donations, but not in the form of a receipt for deductible donations.

Associations are recognised as non-profit organisations if their activities are mainly directed towards improving the welfare of third parties and do not serve the members’ own benefit. Upon application, non-profit associations may request tax exemption from the cantonal tax authorities. Self-help organisations, professional associations or sports and leisure clubs are not “non-profit” as defined by fiscal legislation. The Zewo quality seal for charity organisations is awarded only to associations with a charitable purpose.

Question

Our association has already been tax-exempt for some time. Is it necessary to renew the association's tax-exempt status and, if so, when?

Answer

Tax exemption is issued by the cantonal tax authority on an unlimited basis, although conditions may be stipulated in some cases. Other cantons only grant tax exemption for a limited period, in which case a new application must be submitted after expiry. The tax authorities must be notified of any amendments to the articles of association. 

The tax authority can, however, review this tax-exempt status. In such cases, the association in question is asked to submit certain documentation.

As a principle, associations are subject to taxation. However, upon application, associations may be fully or partially exempted from taxes if they pursue altruistic or public purposes. The cantonal tax office is responsible for tax exemptions. In accordance with cantonal regulations, donations to tax-exempt associations can be deducted from taxes. However, the tax exemption applies only to federal and state taxes, not to value added tax (VAT).

Question

How can our association be exempted from tax?

Answer

As a rule, there is no "automatic" tax exemption for associations. Applications for tax-exemption based on the association's non-profit status must be submitted to the cantonal tax administrations. These will also provide information on the relevant conditions and accept written applications for tax-exemption. The articles of association, foundation protocol, annual financial statements and other documents concerning the association's activities must be enclosed with the application. The articles of association should provide information on the charitable, social, cultural, etc. purpose of the association. The association's purpose must not exclusively benefit its own members (no self-help organisations) and the committee members must, as a rule, perform their role on an unpaid basis.

Upon the dissolution of the association, the liquidation proceeds must go to another tax-exempt association. Tax-exemption does not rule out a possible obligation to pay VAT!

See the work aid "Tax exemption for associations".

Question

Does an association that is recognised as tax-exempt also have to complete a tax return?

Answer

No, such associations are not required to complete a tax return. However, there are cantons that require the annual accounts of these associations to be submitted to the tax administration. This requirement is formulated in the decision on tax exemption.

As a principle, associations are subject to taxation. However, upon application, they may be fully or partially exempted from taxes. Taxation is levied at the place of the association’s registered office. Profits are taxed at the federal and cantonal levels; capital is taxed at the cantonal level only. Associations are taxable for VAT if their turnover exceeds CHF 100,000. In the case of sports and cultural associations that are managed on an honorary basis as well as non-profit organisations, the threshold is CHF 250,000. Please note: VAT is excluded from tax exemption.

Depending on the cantonal tax law, associations must pay tax on their assets, provided that they are not recognised as charitable and therefore exempt from tax.

Question

Our association was founded in July last year. Is it correct that we only have to prepare our annual accounts at the end of this year and thus also our tax statement?

Answer

The association's annual accounts can be completed as stipulated in the articles of association. For the tax year, however, it is the calendar year that applies. If your association generated a profit during the first six months of its existence and if this profit exceeded the exemption limit, you must complete a tax return. In the cantons of Bern and Lucerne, you are required to register your association with the tax authority.

Question

Does an association that is recognised as tax-exempt also have to complete a tax return?

Answer

No, such associations are not required to complete a tax return. However, there are cantons that require the annual accounts of these associations to be submitted to the tax administration. This requirement is formulated in the decision on tax exemption.

Question

Due to our assets, we are now liable to tax. Where do we need to register?

Answer

You can find information on the website of your cantonal tax authority in the section for legal entities. Depending on the canton, you can download and complete the forms for your tax return digitally. In some cases, you may have to register first.

35 percent of the interest income from bank or postal deposits and other capital gains and profits are deducted as withholding tax directly at the source and delivered to the federal tax authority. As a legal entity, an association can reclaim the withholding tax by means of a declaration of interest income or profits at the Swiss Federal Tax Administration in Bern with the application form no. 25 (for the website see link, under Services). The claim for reimbursement lapses if the application is not submitted within three years of the end of the calendar year in which the taxable benefit fell due.

Question

As an association, are we subject to value-added tax? While we do not generate any actual turnover and member fees are not subject to value-added tax, we do receive sponsorship funds.

Answer

It is important that the committee enquires about value-added tax, as a self-declaration requirement applies here. Generally speaking, sponsorship revenues are subject to value-added tax, provided this is genuine sponsorship. Simply naming donors in an annual report, for example, does not belong to this. Sponsors are organisations or individuals that usually support the association with larger amounts and receive something in return: space for logos, advertisements, appearance opportunities, advertising space, etc.

The good news: value-added tax is only payable for non-profit, volunteer-run associations from an amount of CHF 250,000 rather than CHF 100,000 as is the case for all others.

As a principle, associations are subject to taxation. However, upon application, they may be fully or partially exempted from taxes. Taxation is levied at the place of the association’s registered office. Profits are taxed at the federal and cantonal levels; capital is taxed at the cantonal level only. Associations are taxable for VAT if their turnover exceeds CHF 100,000. In the case of sports and cultural associations that are managed on an honorary basis as well as non-profit organisations, the threshold is CHF 250,000. Please note: VAT is excluded from tax exemption.

As a principle, associations are subject to taxation. However, upon application, associations may be fully or partially exempted from taxes if they pursue altruistic or public purposes. The cantonal tax office is responsible for tax exemptions. In accordance with cantonal regulations, donations to tax-exempt associations can be deducted from taxes. However, the tax exemption applies only to federal and state taxes, not to value added tax (VAT).

If sales of more than CHF 100,000 are achieved, associations are also subject to value-added tax. (For voluntarily run sports and cultural associations and non-profit organisations, the threshold lies at CHF 250,000.) Value-added tax is excluded from any tax exemption.