The Swiss Federal Council has clarified that fines are not a business-related expense and are therefore not tax deductible.

It is stipulated in Swiss tax law that neither private individuals nor companies may deduct tax fines from their assessable income. However, the tax treatment of other fines, financial administrative sanctions, and profit disgorgement sanctions is dealt with in other statutes.

The Council has now adopted a report setting out its position. Fines and financial sanctions are not tax deductible, as providing tax relief would reduce their punitive effect. However, profit disgorgement sanctions are tax deductible. The report explains that they are not intended to be punitive and they can therefore be regarded as a business-related expense.

It confirms that fines are not tax deductible in an international context either, for Swiss companies with a permanent establishment or subsidiary abroad. In the case of a profit disgorgement, the Council says that it would be necessary to determine where the disgorgement was directed and where the profit to be disgorged was taxed before a decision can be reached on deductibility.