Provisions in a Swiss sole proprietorship: AHV, warranty, booking

Yes, you can create provisions (Rückstellungen) in a sole proprietorship (Einzelfirma): for obligations from this year whose amount is still open (Art. 29 DBG). The most important one is the AHV/IV/EO (old-age, disability and income-compensation insurance, AVS/AI/APG in French) that you still owe on this year's profit. It belongs in your accounts as a provision as of 31 December. A provision for income tax, on the other hand, is never allowed in a sole proprietorship.

Take Marco, a fictional web developer with a sole proprietorship in Zurich. His compensation office (Ausgleichskasse) set his 2026 advance contributions on an estimated profit of CHF 60'000. In December he sees that it came to CHF 84'000.

The bill for the missing AHV contributions only arrives once his 2026 tax assessment is final, often at the end of 2027 or in 2028. But it belongs in his 2026 accounts. If Marco doesn't book a provision now, he risks losing the deduction in the right year.

You probably know the feeling: year-end is coming up, and you're not sure what you're allowed to set aside and what the tax office will strike out. In this guide you go in four steps from your annual profit to a booked AHV provision, with real 2026 rates, two fully worked AHV examples and journal entries you can copy. We also cover warranty provisions, the bad-debt allowance (Delkredere) and what applies without double-entry bookkeeping. Provisions are one part of your year-end closing as a sole proprietorship.

We built Magic Heidi as Swiss freelancers for Swiss freelancers. The key figure for the AHV provision is your annual profit. You get it faster when your invoices already sit in your invoicing software instead of in Word files.

What is a provision (and what isn't)?

A provision is a debt whose cause lies in the past year but whose amount or timing is not yet fixed. The Swiss Code of Obligations (CO, Obligationenrecht/OR in German) puts it this way: "If past events lead to the expectation of a cash outflow in future financial years, the provisions probably required must be made and charged to the profit and loss account" (Art. 960e para. 2 CO).

In everyday bookkeeping it's easy to confuse with two neighbours. This rule of thumb helps:

And the reserve (Rücklage)? It sounds similar, but it's equity: profit retained by an AG or GmbH.

A sole proprietorship has no statutory reserves. Your equity is simply your capital account. So when you read "tax reserve", it usually means money in a savings account, not a booking.

Which provisions can a sole proprietorship create?

The basis is the Federal Act on Direct Federal Taxation (DBG, LIFD in French). For self-employed activity, costs justified by business use are deductible, "in particular a. depreciation and provisions under Articles 28 and 29" (Art. 27 para. 2 DBG). Art. 29 DBG allows provisions for:

• obligations existing in the business year whose amount is still undetermined,
• risks of loss on current assets, especially on goods and receivables (debtors),
• other imminent risks of loss from the business year,
• future research and development contracts awarded to third parties, up to 10% of taxable business income and at most CHF 1 million.

This overview shows what that means in practice. The source is given for each item, because the cantons differ in the details.

Commercial law and tax law are not the same

The CO allows more than tax law does. For example, it also allows provisions for "securing the long-term prosperity of the undertaking" (Art. 960e para. 3 CO). Schwyz puts it clearly: "The tax-law concept of provisions is narrower than the commercial-law one." (The cantonal sources quoted in this guide are in German; the quotes are our translation.) For tax purposes, only an imminent loss counts, not a merely possible one.

The rules also part ways when you release a provision. Under the CO, provisions that are no longer justified need not be released (Art. 960e para. 4 CO). Tax law, however, adds them back to taxable income (Art. 29 para. 2 DBG). So for your tax return, the narrower rule always applies.

The most important provision in a sole proprietorship: AHV contributions

Why the self-employed should create an AHV provision

When you're self-employed, your AHV/IV/EO contributions belong to the year in which you made the profit. But they're often paid much later: the compensation office only sets the final contributions on the basis of your tax assessment (leaflet 2.02, section 9).

In 2010, the Steuerrekurskommission I of the canton of Zurich (tax appeals commission, today the Steuerrekursgericht) ruled: "The AHV contribution presumably owed for the business year in question must therefore be recorded as a liability in the form of a provision" (decision 1 ST.2010.74). If that year's assessment was already final and the provision was missing, the deduction couldn't simply be claimed later. The only way left was a revision.

Other cantons see it the same way. Lucerne: "At the balance sheet date, presumed contribution debts arising from higher income and/or advance payments that were too low may be provided for" (Steuerbuch LU, § 25 Nr. 6). Zug accepts provisions for the owner's personal AHV contributions "insofar as their amount is demonstrably justified" (Steuerbuch ZG, Ziff. 17.4).

There's a second reason to do the maths now. If your advance contributions cover less than 75% of the final contributions, default interest of 5% a year may be charged, for the 2026 contribution year from 1 January 2028 (leaflet 2.02, section 11). If you find at year-end that your advance contributions were too low, you "must notify the compensation office immediately" (leaflet 2.02, section 8). We explain how advance payments, back payments and interest work in detail in our guide to AHV contributions for the self-employed.

Step 1: Annual profit as the basis

The basis for the AHV provision is your profit for the year. You already have it in Magic Heidi: the income from your invoices minus the expenses from your scanned receipts, always up to date and excluding VAT. So at year-end you don't have to piece the figure together from bank statements.

Check two things before you use the figure:

1. The whole year counts. What matters is your 2026 profit, including invoices your clients only pay in January. So record all your 2026 invoices and receipts, and make sure the invoices still open on 31 December are counted in your profit too. The same goes for 2026 expenses you only pay in 2027.
2. Add AHV back if you recorded it as an expense. If you record your advance contributions in Magic Heidi as an expense, your profit is already lower by those contributions. But the compensation office adds the personal AHV, IV and EO contributions back (leaflet 2.02, section 9). So the AHV basis is your profit before AHV.

Depreciation or private shares that you only book in the year-end accounts still change your taxable profit. Add or subtract them if they're significant.

Step 2: Find the right 2026 rate

From CHF 60'500 of income you pay 10.0% (AHV 8.1% + IV 1.4% + EO 0.5%). Below that, the sliding contribution scale applies, from 5.371% to 9.321%. Important: the rate of your bracket applies to your whole income, not just the part within the bracket.

Below CHF 10'100 you pay the minimum contribution of CHF 530. You'll find the full table in our AHV guide (link above) and in leaflet 2.02.

Two adjustments come on top:

• Interest on equity: the office deducts interest on the equity capital invested in the business as of 31 December. For 2024 the rate was 1.5%. For a freelancer with a laptop and little working capital, this is usually a small amount.
• Administrative costs: the compensation offices also charge up to 5% of the contributions (leaflet 2.02, section 6). The rate depends on your office and often on the amount of your contributions. In 2026, SVA Zürich grades it for the self-employed by the amount of contributions: 5% from the first franc, 4.25% from CHF 7'500, 2.25% from CHF 12'500, 1.5% from CHF 22'500, 1% from CHF 50'000 and 0.5% from CHF 200'000. WAS Ausgleichskasse Luzern charges the self-employed a flat 2% in 2026. The examples below use these two rates. Check your own office's rate, for example on your last advance-contribution invoice.

Step 3: Deduct the advance contributions you've paid

From the final contributions, subtract what you've already paid for 2026, including the Q4 instalment. If that instalment is still unpaid on 31 December, book it as a liability, because its amount is fixed. The rest is your provision. If your advance contributions were too low, report the higher profit to the compensation office now. If what you've paid is below 75%, you otherwise also risk default interest of 5% a year.

If the result is negative, you've paid too much. Then you don't create a provision; instead you show a credit balance with the compensation office on the assets side (in the Swiss SME chart of accounts, KMU-Kontenrahmen: 1180 Receivables from social insurance). Lucerne expressly requires this.

Step 4: Book the AHV provision

You book it as of 31 December to an account for short-term provisions. The account numbers here follow the Swiss SME chart of accounts. In your chart of accounts they may differ, but the logic stays the same.

In practice, sole proprietorships book their own contributions as an expense. Basel-Landschaft treats them like employer contributions, as business-justified expense. Zurich classifies them legally as a general deduction (Art. 33 para. 1 let. d DBG), but treats them like a business expense when it comes to timing. If you book the AHV through your private account, you claim it as a deduction in your tax return. Lucerne requires the personal contributions to be shown openly in the annual accounts.

Worked example A: Sara, graphic designer in Lucerne (sliding scale)

Picture Sara, a fictional graphic designer with a sole proprietorship in Lucerne. Her 2026 profit in Magic Heidi is CHF 42'000. She didn't record her advance contributions as an expense, and we leave out the interest on equity. Her office is WAS Ausgleichskasse Luzern, which charges the self-employed 2% administrative costs in 2026.

Sara's advance payments cover 80.3% (2'400 ÷ 2'988.52). That's above 75%, so there's no interest risk from the 75% rule. She still reports the higher profit to her office.

Had she simply used 10%, it would have come to CHF 4'284 (42'000 × 10% = 4'200, plus 2% = 84). That's 43% too much, and a provision of CHF 1'884 instead of CHF 588.52 would be excessive. The tax office can cut it. Below CHF 60'500, it pays to look at the scale.

Worked example B: Marco, web developer in Zurich (10%)

Back to Marco from the introduction. His 2026 profit from his figures in Magic Heidi, calculated over the whole year and including invoices still open on 31 December: CHF 84'000. His office is SVA Zürich. We calculate the administrative costs using the SVA Zürich 2026 scale (the rate depends on the amount of contributions): the final contributions of CHF 8'400 fall in the band from CHF 7'500 (4.25%), the advance contributions of CHF 5'592.60 in the first band (5%). The SVA sheet doesn't say whether the band's rate applies to the whole contribution or only to the part within the band; we calculate with the whole contribution. The reduced rates only apply if you pay on time. Check your advance invoice.

His advance payments cover only 67.1% (5'872.23 ÷ 8'757). That's below 75%. So Marco reports the higher profit to the compensation office straight away. His journal entries look like this:

The provision lowers Marco's taxable 2026 profit by CHF 2'884.77. It isn't meant to lower his AHV basis: the office adds the personal contributions back to the income according to the tax assessment (leaflet 2.02, section 9). So show the AHV openly in your year-end accounts and your tax return.

Releasing the provision: when the compensation office's bill comes out different

The final bill is based on your tax assessment, not on your estimate. Small differences are normal. You clear the provision and book only the difference. Any default interest comes on top separately and isn't part of this calculation.

Say the office works out an income of CHF 85'000 from Marco's assessment (plus the AHV added back). Then he owes 8'500 + 4.25% = CHF 8'861.25, and the bill comes to 8'861.25 − 5'872.23 = CHF 2'989.02. If it's CHF 81'000, he owes 8'100 + 4.25% = CHF 8'444.25, and the bill comes to CHF 2'572.02.

You pay tax on the released remainder of CHF 312.75 (2'884.77 − 2'572.02) in the year of the release (Art. 29 para. 2 DBG). Instead of 5700, you can also book it to an income account such as "Release of provisions".

Taxes: set money aside, but no provision

This is where the most common mistake happens, because many articles are written about the GmbH. A GmbH or AG may create a provision for its own profit taxes. A sole proprietorship may not. Income and wealth taxes of the Confederation, cantons and municipalities are not deductible (Art. 34 let. e DBG), so there's no tax provision the tax office will recognise for them either.

Zug puts it unambiguously: "For the self-employed, income and wealth taxes are not deductible for tax purposes. Consequently, no tax provisions can be recognised for them either." Appenzell Ausserrhoden keeps it short: "For natural persons, taxes are not deductible." And Schwyz adds income and wealth taxes that you charged to the business back on the form.

So what do you do instead? You put the money aside without booking it: in a separate savings account, monthly or with every incoming payment. How much of your profit makes sense to set aside is in our rule of thumb for taxes.

VAT is a special case. The Q4 VAT return you owe as of 31 December isn't a provision but a liability. After all, the amount is fixed.

Good to know: Marco from example B books the CHF 2'884.77 of AHV as a provision. For his 2026 income tax, he puts money in his tax savings account. Those are two different pots, and only the first one goes into the books.

Warranty and bad-debt allowance: the two other classics

Warranty provision: who needs one and how much

A warranty provision makes sense if you regularly have to do follow-up work after finishing a job: trades, construction, production, also software with a warranty. Pure consultants rarely need one. Without a real warranty obligation, there's no warranty provision either.

Several cantons accept a flat rate without you having to document every single case. The rates differ:

If you work in another canton, look it up in your canton's tax manual (Steuerbuch). The rates above only apply where they're listed.

Take Nina, a fictional painter (a construction-related trade) with a sole proprietorship in Zug. In 2025 she had CHF 160'000 in revenue and a warranty provision of 5%, so CHF 8'000.

In 2026 she makes CHF 180'000 in revenue, so the provision may rise to 5% of that, CHF 9'000. As of 31 December 2026, Nina books only the increase of CHF 1'000 (warranty expense to provisions). If her revenue drops to CHF 150'000 in 2027, she releases CHF 1'500, and that amount becomes taxable.

Bad-debt allowance (Delkredere) on open invoices

The bad-debt allowance covers the risk that clients don't pay open invoices. Strictly speaking, it's a value adjustment on your receivables (Art. 29 para. 1 let. b DBG). You show it as a contra account, in the Swiss SME chart of accounts 1109 Delkredere (allowance for bad debts).

The basis is your invoices still open on 31 December. In Magic Heidi you can see which invoices haven't been paid yet. Lucerne accepts a flat rate of at most 10% of total receivables, in principle after deducting VAT (Steuerbuch LU). Appenzell Ausserrhoden also allows 10% without proof, and Zug 10% on domestic and 15% on foreign receivables. In Lucerne, an invoice you've already written down individually doesn't get the flat rate on top. If you combine both methods, the remaining invoices usually get only 5%.

If a receivable is definitely lost, for example after a loss certificate (Verlustschein / acte de défaut de biens) from debt enforcement (Betreibung / poursuite), it's no longer a matter for the bad-debt allowance. You write it off.

Provisions without double-entry bookkeeping (milk book)

If your revenue in the last business year was below CHF 500'000, under Art. 957 para. 2 CO you only have to keep records of income, expenses and your asset position (the "milk book" or Milchbüechli). The principles of proper bookkeeping then apply "accordingly". You don't need an account 2330 for this. We explain what's allowed in our guide to bookkeeping for a sole proprietorship.

What still works:

• AHV: the cantonal forms for the self-employed have a line for deductions such as AHV contributions. Schwyz states: "The AHV contributions for self-employed activity are to be deducted here." Under Zurich case law, the timing of the deduction follows the method you use to work out your profit. Whether your canton allows the contributions owed or only those paid when you don't keep accounts is something to check with your tax office if in doubt.
• Open invoices and warranty risks: record them in your statement of assets as of 31 December, with a short justification.
• Records: keep your calculation (like the tables above) with your documents. That's your proof that the amount is justified.

You'll find a simple template for income, expenses and assets in our milk book template.

Bottom line: provisions in a sole proprietorship are mostly about AHV

For most freelancers, the question is simpler than it sounds. You book the AHV on this year's profit as a provision. For warranty and bad-debt allowances, the answer depends on your canton. For income tax there's no provision, but there is a savings account.

What you need for this is a reliable profit figure on 31 December. Sara and Marco have one because their invoices and receipts sit in Magic Heidi all year. The rest is one multiplication, one subtraction and one booking.