Writing Off Unpaid Invoices in Switzerland: Delkredere, Tax and VAT

Every freelancer and SME eventually faces it: you delivered the work, sent the invoice, chased it — and the client still has not paid. When reminders and even debt enforcement (Betreibung) come back empty, you must write the receivable off. Done correctly, the loss is tax-deductible and you can even reclaim the VAT you already handed over. Here is how it works in Switzerland.

When a debt is truly uncollectible

A late payment is not a lost payment. As long as there is a realistic chance of collecting, the receivable stays on your books as an asset, even if it is months overdue.

The debt becomes a write-off only when it is objectively uncollectible: the client is bankrupt or insolvent, has disappeared, or enforcement has returned nothing.

In Switzerland the clearest proof is the Verlustschein — the certificate of loss you receive when a Betreibung fails to recover the amount. It documents that you pursued the debt through official channels and came up empty.

You do not always need a Verlustschein. A bankruptcy declaration, a liquidation with no assets, or documented evidence that the debtor cannot be located can also establish that the money is gone for good.

Writing it off in your books (Delkredere)

The bookkeeping move is to post the loss against the receivable, removing it from your balance sheet so your profit reflects reality rather than money you will never see.

Swiss accounting distinguishes the Delkredere — a precautionary allowance for doubtful debts — from the actual Forderungsverlust, the loss once a specific debt is definitively gone.

The allowance is usually a flat percentage of your outstanding receivables, often around 5% for domestic clients and more for foreign ones, adjusted for what you know about each customer.

For income tax, the write-off is deductible, but only when it is justified. A receivable you simply stopped chasing is not yet a deductible loss — the tax office expects evidence that collection was genuinely impossible.

Reclaiming the VAT you already paid

This is the part many miss. When you issued the invoice you reported output VAT (MWST) on it, and you paid that VAT whether or not the client ever settled up.

Under Art. 41 MWSTG the tax liability is adjusted when a consideration proves wholly or partly irrecoverable. You reverse the output VAT in the period the loss is established, not by amending the old return.

This applies to the default method of accounting on agreed consideration (vereinbartes Entgelt). If you account on received consideration (vereinnahmtes Entgelt), you only reported VAT on what was actually paid, so there is nothing to reclaim.

Keep the evidence ready, because the FTA can ask for it: the original invoice, your reminders, the Betreibung records, and the Verlustschein or bankruptcy notice all support the claim.

Getting the paperwork right

Write-offs invite scrutiny, so build a clean paper trail from the first reminder to the final entry. The stronger the evidence, the smoother both the tax and the VAT treatment.

A Verlustschein is not the end of the story. The debt itself survives for up to 20 years, and you can re-open enforcement if the debtor later comes into money.

If a client pays after you wrote the debt off, that money is not a windfall. Re-book it as income in the year you receive it and declare the corresponding VAT again.

Finally, review your Delkredere at least once a year and adjust it to what you actually expect. A realistic allowance keeps your accounts honest and your tax position defensible.