Pro bono services and donated hours in SMEs: balance sheet valuation, tax deductibility and operational tracking in Switzerland

Many Swiss SMEs provide skills, consulting or labour free of charge or at a discount to associations, foundations, schools or projects of public interest. Other cases involve hours “donated” to clients out of solidarity, to build relationships or to recover from difficult situations. From an accounting and tax perspective, however, “not invoicing” does not mean “not recording”: you need to clarify the nature of the transaction, the cost borne by the company and any treatment as a donation.

Without tracking, the balance sheet understates actual staff commitment, margins by service appear inflated and, in an audit, there is no evidence to deduct donations or justify the absence of attributable revenue. A lightweight procedure that is consistent with Swiss accounting standards (Swiss GAAP FER / micro-entity) and with federal and cantonal tax law protects the SME and strengthens communication with stakeholders and banks.

This guide distinguishes pro bono services to non-profit third parties, commercial discounts and employee volunteering, with operational guidance you can use in Accountex for hours, cost centres and year-end documentation.

Swiss accounting standards do not provide for capitalising donated services to third parties: no intangible asset “pro bono goodwill” is created. The company records costs actually incurred in the period (salaries, social charges, materials, share of overheads if the accounting policy provides for this consistently) on the service cost account or on a “Pro bono / CSR” cost centre.

To reflect the economics of the transaction, many SMEs use a two-step internal entry: (1) allocation of cost to the cost centre or project; (2) booking of imputed revenue and an in-kind donation for the same amount, based on an internal price or a documented discounted rate card. Imputed revenue does not increase taxable profit if correctly treated as a donation; it avoids job reports showing 100% margins on non-invoiced hours. Micro-entities may limit themselves to pure cost, provided this stays consistent year on year and is explainable in the notes or management report.

The value used must be prudent: full cost (hours × internal hourly cost) or reduced market price, never an inflated selling value to artificially inflate donations. Document the calculation basis (internal rate, 2026 rate card, overhead allocation) in a policy approved by management.

Salaries, social charges and materials allocated to pro bono services are as a rule deductible as actual operating expenses. Deduction as a charitable contribution for legal entities is governed by Art. 59 para. 1 let. c DBG (Federal Direct Tax Act; LIFD) and corresponding cantonal provisions: cash or in-kind donations, including valued services, to qualified entities, within the federal limit of 20% of net profit (some cantons apply different thresholds, e.g. 10%). The valuation basis must be prudent and documented, without inflating beyond cost actually incurred or a plausible market price, and without seeking a double tax benefit on the same amount.

Common requirements: beneficiary with tax exemption for purposes of public utility or public service (Art. 56 let. g DBG), confirmed by cantonal tax authority decision or cantonal registration where required — contributions to entities exempt solely for religious purposes are not deductible; free service, without consideration, contractual obligation or repaid commercial advantage; written proof (agreement, description of service, approved timesheets). Donations to political parties, private individuals or foreign organisations without a qualified presence in Switzerland do not fall under Art. 59 para. 1 let. c DBG. For LLCs (GmbH/Sàrl) and corporations (AG/SA), the same principles apply at federal level; always check practice in the canton of registered office and any cantons where property or establishments are located.

Note: inflating the donation value beyond cost incurred or beyond a plausible market price exposes you to adjustment. Keep correspondence, mandates and hour supporting documents as for any invoiced project.

In Switzerland, VAT in principle applies to supplies made for consideration (Art. 18 VAT Act; LIVA). Free supplies to third parties not closely related to the taxable person are as a rule not subject to tax, as there is no relevant consideration. The case of free supplies to closely related persons (Art. 3 let. h LIVA) must still be checked: tax may be due on market value (Art. 26 para. 2 LIVA) and, where applicable, prior input tax must be corrected (own use; Art. 31 para. 2 LIVA). Donations of services to entities of public utility, without a commercial relationship, often fall outside the taxable field; free supplies to regular clients may reveal implicit consideration or a commercial link.

VAT-registered SMEs should label pro bono transactions in accounting with a dedicated VAT code (e.g. non-taxable / out of scope) only after verifying classification. If in doubt, a ruling request to the Federal Tax Administration (FTA; AFC) reduces risk across several periods. Materials transferred free of charge follow the rules on gratuitous transfers of goods with input tax deduction (Art. 31 para. 2 LIVA).

Although a specific P&L line is not mandatory, many SMEs include a voluntary indicator in the notes or management report: total pro bono hours, value at internal cost, list of main beneficiaries. This does not replace correct P&L allocation but strengthens transparency towards banks and partners.

Avoid presenting pro bono value as operating revenue: margin KPIs should separate invoiced amounts from internal allocations. In Accountex, cost centre filters allow exporting data for the shareholders’ meeting or CSR report without mixing commercial jobs.