Provision for major renovations in the future

According to the tax practices of some cantons, companies are permitted to recognize provisions for major renovations to their real estate in the future. Major renovations are necessary after a certain period of time and cause significant expenses, such as the replacement of facades, roofs, elevators, and heating systems. By recognizing a provision, these expenses can be apportioned over several years, resulting in favorable income tax effects. In the cantons of AG, AR, BL, BE, GR, LU, NW, OW, SH, SZ, TG, UR, VS, ZG, and ZH, a lump-sum amount in the form of a fixed percentage could be recognized annually without requiring specific documentation, provided that the total amount of the provision did not exceed a certain limit. Such a lump-sum provision is generally not provided for in the cantons of AI, BS, FR, GE, GL, JU, NE, SG, SO, TI, and VD.

Effective 1 January 2026, the cantons of BL, GR, LU, NW, OW, SZ, UR, and ZG have
abolished their lump-sum provision solution (AG and VS as early as the 2025 tax period). Depending on the canton, the recognized lump-sum provision must be reversed by 2027, 2028, or 2030 at the latest, or upon sale. Otherwise, the tax authorities will increase the taxable income by the respective amount. In contrast, the canton of ZH currently does not plan to adjust its practice.

The reversal of these lump-sum provisions is largely at the taxpayer’s discretion, allowing the timing and amount of the reversal to be planned in advance within the respective transition period for commercial and tax accounting purposes. With a few exceptions, the recognition of provisions for major renovations in the future will then only be possible in specific cases. The cantonal requirements (e.g., specific renovation plan, imminent conclusion of contracts, board resolution, allocation period, etc.) vary and must therefore be clarified separately on a case-by-case basis.

Extension of loss carryforward to ten years

A business that incurs a loss in a given year may offset this loss against future profits for tax purposes. The future tax liability is thus reduced. This existing mechanism reflects the constitutional principle that taxation by the state must be based on the ability-to-pay principle. Loss carryforward is available to a business regardless of its organizational form (in particular self-employment or a corporation). Under current tax law, however, the loss carryforward is limited to seven years. After that, the loss “expires” and can only be claimed for tax purposes in the exceptional case of a restructuring.

The period for offsetting losses will now be extended to ten years. The deadline for filing a referendum against the amendment of the tax law expired on 17 April 2026. The new legal provision stipulates that losses incurred starting with the 2020 tax period will be available for offsetting against profits for a period of ten years. It is generally expected that the Federal Council will implement the amendment of the tax law effective 1 January 2028. As a result, losses from 2020 will not “expire” until 2031, rather than as early as 2028.

The extension of the loss carryforward period primarily benefits companies that suffered significant losses during the COVID-19 pandemic. However, the new regulation may also be of interest to startups with high investment costs during their start-up phase. Furthermore, we have repeatedly seen cases involving several consecutive difficult fiscal years for which the previous seven-year period was insufficient to fully offset the losses.

Date of the abolition of the imputed rental value

On 1 April 2026, the Federal Council decided to implement the reform of residential property taxation effective 1 January 2029. We already have provided information on the reform in our October 2025 newsletter, noting in particular that the reform affects more than just property owners. The extensive elimination of the deductibility of interest on debt will affect the taxable income of many taxpayers, even those who do not own residential property. It is now clear that there are just over two and a half years remaining until the new regulations take effect. If you are considering major renovations to your residential property or a reallocation of assets, now is the time to begin tax-oriented planning.

Your contacts Mathias Häni and Patrick Engstler look forward to hearing from you.