Possibility of booking a fine as a provision.

Legal entities can recognize provisions as expenses in accounting when they are commercially or professionally justified, leading to a reduction in taxable profits. Provisions can also be made for fines or other financial sanctions, but only if the fine does not have a punitive character.

What are provisions?

‍A provision involves an obligation to perform, which is usually based on legal obligations or an incident in the past. The occurrence and amount of the obligation are not yet determined or are not precisely quantifiable. Provisions are made, for example, for litigation risks of court proceedings, pending transactions, uncertain liabilities, omitted expenses, or imminent losses. Legal entities can recognize provisions according to Art. 27 Para. 2 DBG as expenses in accounting if they are commercially or professionally justified. This entry in the income statement results in a reduction of the taxable income. Provisions that fall under commercial or professional purposes are specifically provisions for: