Flagging expenses for Swiss tax code 420

The Swiss cantons give various grants to businesses and non-profit associations. Locally these are referred to using the term subvention but in English speaking countries we would refer to these payments as grants or state aid.

When organizations use this money, they are not permitted to reclaim the VAT Input Tax

Example: a non-profit spends CHF 1,000,000 fixing their building. They receive a grant of CHF 600,000. They use CHF 400,000 from their own bank account to pay some expenses and they can reclaim Input Tax on this 400k. When they use the 600k from the grant, they can not reclaim VAT Input tax.

This also appears to be applicable to Acquisition tax on imports of goods and services using the reverse charge mechanism.

Tax code 420 on the Swiss VAT form is to include the VAT paid with funds from state aid.

One way to fill in box 420 is to create a journal entry.

Can anybody provide more suggestions about how to automate this, for example, when entering a supplier invoice, how could the company indicate that they are only reclaiming 40% of the VAT for that invoice and put the rest in tax code 420?

This is supported with the “Taxes Deductible Rate” in version 6.0.

You will need a special tax to fill this code on the tax report which has a 0% rate and only the base amount is included on tax code 420.

One option is to use the deductible tax rate already suggested and the update the tax lines of the non deductible amount to include the above mentioned tax.

Another option is to manually split the invoice into two lines:

  • One for the deductible part
  • Another for the non deductible part

And set the propert tax on each line.