Do associations have to pay taxes in Switzerland?

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”.

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 taxes for associations?

Taxes on profit (profit tax)

• Direct federal tax: The Confederation grants all associations a tax-free allowance of 5,000 francs for taxing their profits. For non-profit associations (and there are many), the exemption limit for the Confederation is even 20,000 francs.
  
• Cantonal and municipal tax: 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. The link will open in a new window Go to the overview of the cantonal tax offices on steuerkonferenz.ch
  

Taxes on assets (capital taxes)

• Direct federal tax: The Confederation does not tax the capital of associations.
  
• Cantonal and municipal tax: 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. The link will open in a new window Go to the overview of the cantonal tax offices on steuerkonferenz.ch
  

Value added tax

Associations must pay value added tax if they generate revenue in excess of 100,000 francs. For non-profit and volunteer-run associations, as well as sports and cultural associations, the exemption limit is 250,000 francs.

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?

No, any liability for VAT does not cease to apply due to a tax exemption.

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.

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.