Accounting for a Swiss foundation: audit, supervision, restricted funds

A foundation is a pool of assets dedicated to a purpose: supporting research, culture, people in need. It has neither members nor partners — but it is accountable, to its supervisory authority and often to an audit firm. This guide covers what sets its accounting apart from that of a business.

Accounts kept “like a business”

The foundation board keeps the books, and the accounting rules of the Code of Obligations (CO) apply by analogy (Art. 83a of the Swiss Civil Code, CC). A foundation acquires legal personality through its entry in the commercial register (Art. 52 and 81 CC) — since 2016, family foundations and ecclesiastical foundations have had to register too. In principle, it therefore keeps full commercial accounts — in practice, double-entry bookkeeping — and prepares annual financial statements every year: balance sheet, income statement and notes (Art. 957 ff. CO).

Exception: a foundation exempted from appointing an audit firm (see below) may limit itself to accounts of income and expenditure and of the asset position (Art. 957 para. 2 no. 3 CO).

Books and supporting documents must be kept for ten years (Art. 958f CO).

An audit firm, unless exempted

The foundation appoints an audit firm (Art. 83b CC), and the rules for companies limited by shares apply: an ordinary audit if two of the three thresholds are exceeded in two consecutive financial years — a balance sheet total of CHF 20 million, turnover of CHF 40 million, 250 full-time positions (Art. 727 CO) — and a limited audit otherwise, which is the case for most foundations. The supervisory authority can require an ordinary audit.

Exemption. At the foundation board's request, the supervisory authority can exempt the foundation from appointing an audit firm if three conditions are met: a balance sheet total below CHF 200,000 in two consecutive financial years, no public fundraising, and an audit that is not needed to give an accurate picture of the foundation's assets and results (Ordinance on the Audit Firm of Foundations, SR 211.121.3). The exemption is revoked if the conditions are no longer met, and it does not release the foundation from reporting to its authority.

Family foundations and ecclesiastical foundations are neither supervised nor required to appoint an audit firm (Art. 87 CC).

The supervisory authority

A standard foundation is supervised by the public body to which its purpose relates: the Confederation — the Federal Supervisory Authority for Foundations, for foundations active at national or international level —, the canton or the commune (Art. 84 CC).

Each year, usually within six months of the financial year-end, the foundation submits to its authority its annual financial statements, an activity report and the minutes of the board meeting that approved them. The audit firm sends a copy of its report (Art. 83c CC), and the foundation discloses the total remuneration paid to its governing bodies (Art. 84b CC). Forms and details vary from one authority to another.

What differs from a business

The foundation's capital

A foundation's equity is not share capital but the foundation capital: the initial assets dedicated by the founder to its purpose (Art. 80 CC), plus the surpluses accumulated since. The law sets no minimum; in practice, the federal supervisory authority expects at least CHF 50,000. There are neither partners nor dividends. The deed of foundation may require the initial assets to be preserved and only the income from them to be spent: the accounts must then distinguish the capital to be preserved from the portion available.

Donations, subsidies and restricted funds

A foundation often receives donations — sometimes earmarked for a specific project — and public contributions. As for an association, an earmarked donation is tracked in a restricted fund under liabilities until it is used, so that the year's result remains readable.

Swiss GAAP FER 21

For a foundation that raises donations from the public, the Swiss GAAP FER 21 standard is the benchmark, and it is mandatory for the Zewo seal of approval. A foundation that the law subjects to an ordinary audit must also prepare its financial statements under a recognised standard (Art. 962 para. 1 no. 3 CO). FER 21 separates fund capital — funds restricted by donors — from organisation capital (base capital, capital designated by the board, free capital), and adds a cash flow statement, a statement of changes in capital and a performance report.

VAT and taxes

VAT. The registration threshold is CHF 100,000 of turnover, or CHF 250,000 for a foundation recognised as public-benefit (Art. 10 para. 2 let. c of the VAT Act, VATA). Donations and subsidies are not consideration: they do not count towards this turnover. For a public-benefit foundation, services that promote a sponsor's image are excluded from the tax (Art. 21 para. 2 no. 27 VATA). For a VAT-registered foundation, donations are declared in box 910 and subsidies in box 900; subsidies also reduce deductible input tax (Art. 33 para. 2 VATA, box 420) — through tacit taxation at the standard rate or through an allocation key (VAT Info 09, section 2.3).

Direct taxes. A foundation is taxed as a legal entity, but contributions to its assets are not part of its taxable profit (Art. 66 para. 1 DFTA). For direct federal tax, a profit below CHF 5,000 is not taxed (Art. 71 DFTA), nor is a profit of up to CHF 20,000 allocated exclusively and irrevocably to non-profit (ideal) purposes (Art. 66a DFTA). A public-benefit foundation can be exempt (Art. 56 let. g DFTA), and its donors can then deduct their donations, up to 20% of their income or profit (Art. 33a and 59 DFTA).

How BeMyTalent adapts

When you activate accounting, you choose the legal form Foundation. The chart of accounts then includes:

• 3510 Dons et legs (donations and bequests, box 910) and 3520 Subventions et contributions publiques (subsidies and public contributions, box 900), with the input tax reduction method chosen in the VAT settings;
• 2700 Fonds affectés (restricted funds) and 6620 Variation des fonds affectés (change in restricted funds);
• equity in the foundation's name (Capital de l'organisation, organisation capital), a current account for the members of the foundation board, with the accounts specific to companies (dividends, statutory reserves, own shares) hidden.

Entries are prepared from your supporting documents and bank statements; the balance sheet, income statement and VAT return are ready for the board, the audit firm and the supervisory authority. Exports let you hand everything over to your fiduciary or your auditor.

BeMyTalent does not replace your fiduciary: it takes the data entry off their hands. You keep the final say on every entry.

Other legal forms: association, GmbH (Sàrl), AG (SA), simple partnership.

FAQ

Does a foundation have to keep full accounts?

In principle, yes: balance sheet, income statement and notes, following the rules of the Code of Obligations (Art. 83a CC). Only a foundation exempted from appointing an audit firm can limit itself to accounts of income, expenditure and assets (Art. 957 para. 2 no. 3 CO).

Can a small foundation do without an audit firm?

Yes, if the supervisory authority agrees: a balance sheet total below CHF 200,000 in two consecutive financial years, no public fundraising, and an audit that is not needed to assess its situation. It can then keep accounts of income, expenditure and assets, and it still reports to the authority.

What has to be submitted to the supervisory authority?

Usually within six months of the financial year-end: the annual financial statements, an activity report, the minutes of the board meeting that approved them and, where applicable, the audit firm's report, which the audit firm also sends itself. Each authority specifies its own forms.

Does a public-benefit foundation pay VAT?

Only if its turnover reaches CHF 250,000 a year (Art. 10 para. 2 let. c VATA) — CHF 100,000 for a foundation that is not recognised as public-benefit. Donations and subsidies are not included in this calculation.

Try BeMyTalent free — choose “Foundation” when you activate accounting, and the chart of accounts adapts. → Start the trial