Deductible interest

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Deductible interest in a credit application

In Switzerland, interest paid on bank loans and credit cards is tax-deductible. This deductibility is a major tax advantage for borrowers, helping to reduce their overall tax burden.

Deductible interest: the case of a bank loan

When a borrower takes out a loan with a bank, he or she is entitled to deduct the interest paid throughout the year from taxable income. At the end of each year, the lending bank is required to provide the borrower with a tax certificate detailing the total amount of interest paid over the past year. This certificate is essential if the borrower is to justify the deduction to the tax authorities.

It’s important to note that only the interest on the loan is tax-deductible. The borrowed capital itself, i.e. the amount of the loan, is not tax-deductible. This rule applies to all types of bank loan, whether mortgage, personal loan or consumer credit.

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For private individuals living in Switzerland, Swiss nationals or holders of a B, C permit or legitimation card (D, E, G and H), increasing your liquidity is possible, and so is saving money. Benefit from an individualized study of your project, and a tailor-made loan offer very quickly.

Deductible interest: the case of a bank loan

When a borrower accepts a credit offer from a bank, he or she is entitled to deduct the interest paid throughout the year from his or her taxable income. At the end of each year, the lending bank is required to provide the borrower with a tax certificate detailing the total amount of interest paid over the past year. This certificate is essential if the borrower is to justify the deduction to the tax authorities.

Deductible interest: the case of a private lender

If the loan is taken out with an individual (a private lender), the borrower can also deduct the interest paid, but only under certain conditions. For the deduction to be valid, precise supporting documents must be available, dated and signed by both parties involved, attesting to the amounts paid. These documents serve to prove the legitimacy of the deduction in the event of a tax audit.

Leasing: Non-deductible interest

It’s crucial to understand that financing a vehicle through leasing does not benefit from the same tax advantages. Unlike conventional loans, the interest paid on a lease is not tax-deductible. This distinction is due to the very nature of leasing, which is considered a long-term rental with a purchase option, rather than a conventional loan. This means that leasing payments, even if they include interest, cannot be deducted from taxable income.

Importance of the Tax Certificate

The tax certificate provided by the bank is an essential document for the tax return. It guarantees the transparency of the interest paid and provides the necessary proof to benefit from the deduction. In the case of a private loan, the borrower must ensure that a formal, signed and dated agreement is obtained to justify the interest payments made. Without these documents, the deduction may be refused by the tax authorities.

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Practical advice

To optimize your tax situation:

Keep your tax receipts: Make sure you receive and keep all tax certificates issued by your bank or private lender.
Check your returns: When you prepare your tax return, make sure you include interest paid correctly and attach the required supporting documents.
Anticipate specific rules: If you are using a leasing agreement to finance your vehicle, be aware in advance that interest payments cannot be deducted, and plan accordingly.

In short, the deductibility of interest on bank and private loans is a significant tax advantage in Switzerland. However, it is essential to be aware of the associated conditions, and to have the documentation required to justify these deductions. For those who finance purchases by leasing, it’s worth bearing in mind the absence of any tax deduction on interest paid.

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