Why packaging deposits require accounting attention
In food distribution, logistics, manufacturing, and wholesale trade, EPAL pallets, glass crates, kegs, and other reusable packaging circulate continuously between suppliers, customers, and pooling operators. To ensure their return, the parties apply security deposits: amounts paid as a guarantee, intended for refund when the packaging is returned in the agreed condition.
For a Swiss SME, treating these amounts as merchandise purchases, revenue, or warehouse stock is a common — and costly — mistake. The deposit does not represent the economic value of the packaging, but a transitional treasury position linked to an obligation to return it. Incorrect accounting inflates inventory, distorts operating margin, and skews liquidity indicators used to plan payments, payroll, and investments.
This guide explains how to distinguish deposits and reusable packaging in the context of the Swiss Code of Obligations (OR) and Swiss accounting standards (Swiss GAAP FER), with particular attention to VAT and operational management between supplier and customer.
Deposit, ownership, and inventory: three concepts not to confuse
Before opening the chart of accounts, it is essential to clarify the legal and economic nature of the transaction. In Swiss commercial practice, three situations occur most frequently:
Security deposit
Payment of money as a guarantee for the return of packaging. It does not transfer ownership of the packaging nor generate a definitive cost or revenue until it is retained or offset. It is recorded on the balance sheet as a transitional asset or liability.
Packaging held on deposit
The packaging remains the property of the supplier or the pool (for example CHEP). The company holds it on behalf of others: it is not its own warehouse inventory, but goods in custody. Any associated deposits follow the security deposit logic.
Purchase of packaging
If the packaging is transferred in ownership (definitive sale), the amount falls under cost of goods or a fixed assets/auxiliary materials account, with corresponding inventory or depreciation entries. It is no longer a refundable deposit.
The distinction depends on the contract, the invoice, and the general terms and conditions of the supplier or pooling system. Always verify whether the invoice explicitly indicates a separate "deposit" or "Pfand" from the price of the goods, and whether there is a contractual obligation to return the packaging with a refund.
Supplier and customer perspective: what changes on the balance sheet
The same pallet can generate opposite entries in the balance sheets of two SMEs operating as supplier and customer. Here is a concise comparison of typical entries:
| Aspect | Supplier side (charges deposit) | Customer side (pays deposit) |
|---|---|---|
| Receipt / payment | Collects deposit from customer → increase in cash | Pays deposit to supplier → cash outflow |
| Balance sheet account | Liability: "Packaging deposits from customers" | Asset: "Packaging deposits with suppliers" |
| Income statement | No revenue until the deposit is retained | No cost until the deposit is lost or offset |
| Packaging return | Refund to customer → reduction in liability and cash | Refund received → reduction in asset and increase in cash |
| Deposit retained | Offset or packaging sales invoice → revenue | Loss or definitive purchase → cost or fixed asset |
| Inventory | Supplier-owned packaging: excluded from inventory | Packaging on deposit: excluded from inventory |
| Documentation | Deposit note, pallet statement, credit on returns | Invoice with separate deposit line item, return vouchers |
Accounting under the OR and Swiss GAAP FER
Swiss SMEs subject to the obligation to keep accounts (Art. 957 et seq. OR) must represent transactions in a way that gives a true and fair view of the financial position. Deposits on reusable packaging are generally classified among other short-term receivables or payables (Art. 959a para. 1 OR), for example under "Security deposits": they do not constitute inventory or accrued revenue or costs while the position remains open.
When collecting the deposit (supplier): Debit Cash / Bank, Credit Packaging deposits from customers. The amount does not enter sales revenue.
When paying the deposit (customer): Debit Packaging deposits with suppliers, Credit Cash / Bank. The amount does not increase the cost of goods purchased.
On return and refund: mirror entry. If the supplier retains part of the deposit for missing or damaged packaging, the retained portion must be reclassified: on the supplier side as revenue (packaging sale or contractual penalty, depending on the contract); on the customer side as cost or loss on deposits.
Numerical example — Ticino food distributor
A wholesaler purchases beverages for CHF 12,000 and pays CHF 1,800 in deposit on returnable glass crates. Correct entry: CHF 12,000 to Cost of goods / Suppliers and CHF 1,800 to Deposits with suppliers / Bank. At quarter-end, it returns 90% of the crates and receives CHF 1,620 in refund: Debit Bank, Credit Deposits with suppliers. The CHF 180 retained for broken crates becomes an actual cost (Debit Packaging cost or Loss on deposits, Credit Deposits with suppliers).
If the full CHF 1,800 had been recorded as cost of goods, the margin would appear artificially low and, upon refund, would be overstated — with effects also on deductible VAT and the tax base.
VAT treatment of security deposits
Under Art. 18 para. 2 lit. h of the VAT Act (LIVA), amounts paid as a deposit for packaging do not constitute consideration for a taxable supply, provided they are clearly identified as a refundable security deposit and distinguished from the price of the main supply. The deposit amount therefore does not enter the VAT return.
VAT becomes relevant when the deposit loses its character as a security deposit: for example if the packaging is not returned and the deposit is retained definitively, or if the sale of the packaging is invoiced. In that case, the supply is subject to the applicable rate — generally the standard rate (currently 8.1% on supplies of goods in Switzerland), unless sector-specific exceptions apply or the packaging follows the main supply for tax purposes (Art. 19 para. 4 LIVA).
In practice, invoices must clearly distinguish the "packaging deposit" or "Pfand" line item from the goods line item, without charging VAT on the security deposit. In the case of a VAT-excluded deposit refund, it is sufficient to document the payment (e.g. Pfand statement or commercial credit note): a VAT credit note is only required if VAT was incorrectly charged on the deposit, or when the retained portion is invoiced as a sale of the packaging. Keep pallet return statements and proof of offsets: they are useful documents in the event of an audit.
Why pallets should not end up in inventory
One of the most common mistakes is recording EPAL pallets or reusable containers as warehouse stock at the value of the deposit paid. This approach is incorrect when the company does not own them:
- •Inflated inventory: pallets in circulation do not represent realisable value for the company; including them in year-end inventory distorts working capital and liquidity ratios.
- •Distorted costs: when the deposit is refunded, whoever recorded the packaging in inventory must post a non-existent inventory outflow, generating inventory variances that are difficult to explain to the auditor.
- •Pooling systems: with operators such as CHEP or sector pools, the packaging belongs to a closed circuit; your obligation is to return equivalent units, not to hold an inventory asset.
Exception: if the company purchases pallets or packaging in definitive ownership (without an obligation to return), the amount is classified as auxiliary material or tangible fixed assets, with depreciation if the useful life exceeds one financial year. Even in this case, any security deposit — if present at a later stage — remains separate from the value of the packaging purchased.
Impact on liquidity and cash flow
Packaging deposits can tie up significant amounts, especially for SMEs with high logistics turnover. A company shipping 200 pallets per week with an average deposit of CHF 25 per unit may have over CHF 5,000 in cash "locked up" on the pallet circuit alone — not counting crates, kegs, or cylinders.
Recommended monitoring
- • Net deposit balance (assets − liabilities) at month-end
- • Average return days by packaging type
- • Deposits retained or lost in the quarter (operational indicator)
- • Variances between physical pallet register and accounting
Disclosure in financial statements
In a management report or income statement commentary, note if active deposits exceed a material threshold relative to available liquidity. Investors and lending institutions view transparency on this type of "operationally tied-up cash" positively, as distinct from current financing needs.
Operational process: from invoice to reconciliation
A structured workflow avoids double counting and delays in refunds. Here are the essential steps to implement, even in a small trust company or a lean administrative team:
- Document receipt: verify that the invoice and delivery note separate deposit and goods; check that VAT is not charged on the security deposit.
- Accounting entry: post the deposit to a dedicated security deposits account, never to cost of goods or revenue.
- Physical register: maintain a pallet/crate register (even in a spreadsheet) with dispatch dates, return dates, and balance by counterparty.
- Periodic returns: plan weekly or monthly returns to suppliers and pools, with documentation of return vouchers.
- Reconciliation: compare accounting balance and physical register quarterly; follow up on overdue refunds beyond contractual terms.
- Closing positions: for deposits not recoverable within the financial year, reclassify from security deposit to cost or revenue with supporting documentation.
Accounting software such as Accountex allows you to link security deposit or deposit accounts to specific suppliers and customers, simplifying reconciliation and report extraction for internal audit or ordinary audit under Art. 727 OR.
Year-end closing and audit
At the balance sheet date, packaging deposits must reflect the positions actually open. Checklist for the accounting manager:
| Check | Action |
|---|---|
| Active deposit balance | Reconcile with supplier statements and pool reports; follow up on missing refunds or Pfand statements |
| Passive deposit balance | Compare with customer statements; provision for any known disputes |
| Aged deposits | Analyse items > 12 months; reclassify or reverse if refund is no longer expected |
| VAT consistency | Verify that deposits retained at year-end have correct VAT documentation |
| Physical inventory | Exclude packaging held on deposit from merchandise inventory count |
| Balance sheet note | If material, disclose separately in balance sheet analytics or notes (Art. 959a para. 3 OR; Swiss GAAP FER 6) |
For companies subject to ordinary audit, the auditor will verify that deposits are not mixed with inventory and that outstanding items are justified. Organised documentation of the pallet register significantly reduces adjustment requests.
Summary for entrepreneurs and trustees
Deposits on reusable packaging and pallets are neither merchandise nor operating capital: they are treasury guarantees that pass through the balance sheet until the packaging is returned or the deposit becomes a definitive cost or revenue. Separating them from inventory protects the quality of margin, liquidity, and tax data.
Invest time in defining dedicated accounts, maintaining a physical register, and periodic reconciliation with suppliers and customers. With a few accounting measures — and software that clearly distinguishes transitory items, costs, and revenue — even a Swiss SME with high logistics intensity can manage complex packaging circuits without surprises at year-end.