Depreciation in simple accounting

What depreciation means

When you buy a laptop, a machine, or office furniture for your business, you don't deduct the full cost in the year of purchase. Instead, you spread the cost over the expected useful life — that's depreciation. The tax office requires this because these are multi-year assets, not consumables.

Straight-line vs. declining-balance

Swiss tax law allows two methods:

Straight-line depreciation: You deduct the same amount each year. A CHF 3,000 laptop with a 3-year life = CHF 1,000 per year.

Declining-balance depreciation: You deduct a percentage of the remaining book value each year. For most assets, this is 40% of the declining balance (for intangible assets like software: 40%). The advantage: higher deductions in the first few years, lower taxable income early on.

How long is the useful life?

The Swiss Federal Tax Administration (FTA) publishes useful life tables. Common examples:

IT hardware (laptops, servers): 3 years. Office furniture: 8 years. Vehicles: 5 years. Software: 3 years. Machinery: 5–10 years.

As a sole proprietor, you are generally free to set the useful life — as long as it's commercially justifiable. Setting it too short to reduce taxes faster will raise questions during an audit.

Recording depreciation in simple accounting

In cash-basis accounting, there are no balance sheet accounts. Nevertheless, you should keep a fixed asset ledger listing all assets with their purchase dates, costs, useful lives, and annual depreciation. This is your basis for the tax return and provides proof in case of an audit.

Each year, you deduct the depreciation amount as an expense. The asset ledger serves as supporting documentation.

Special case: low-value assets

Assets under CHF 1,000 (or a higher threshold set by your canton) can usually be expensed immediately. This saves the effort of tracking depreciation for small items. Ask your cantonal tax office what threshold they apply.