{"id":4605,"date":"2019-04-04T11:30:25","date_gmt":"2019-04-04T09:30:25","guid":{"rendered":"https:\/\/www.startups.ch\/en\/blog\/?p=4605"},"modified":"2019-04-04T11:37:31","modified_gmt":"2019-04-04T09:37:31","slug":"distinction-between-doing-business-and-pursuing-a-hobby","status":"publish","type":"post","link":"https:\/\/blog.startups.ch\/en\/distinction-between-doing-business-and-pursuing-a-hobby\/","title":{"rendered":"Distinction Between Doing Business and Pursuing a Hobby"},"content":{"rendered":"\n

The distinction between doing business and pursuing a hobby is often not fully clear. It is crucial, however, because engagement in activities can obtain various classifications under tax law. According to the Federal Court, there are two elements that decide whether you do business or not: appropriateness of profit and pursuit of profit. Nonetheless, each case has to be assessed individually.<\/h2>\n\n\n\n
\"\"<\/figure>\n\n\n\n

Differentiating\nIndicators and Definitions<\/strong><\/h3>\n\n\n\n

It is often not so easy to make a distinction\nbetween doing business and pursuing a hobby. It is so because, contrary to\ndoing business, the primary intention of pursuing any hobby is not gaining\nincome but rather acting for personal reasons or out of personal interests. Under\ntax law, finding the difference is relevant, however, because no proceeds from\na hobby are subject to taxation. On the other hand, no losses may be deducted\nfrom taxable income.<\/p>\n\n\n\n

The following indicators help tell the\ndifference: Recording losses year after year suggests that you pursue a hobby. However,\nif, taking into account all the circumstances, some profit can be expected in\nthe long run, you do business. Nonetheless, not only these indicators should be\nused and each case should be assessed individually. The Federal Court has based\nits argument on two criteria: appropriateness\nof profit and pursuit of profit. Appropriateness of profit implies the\ngeneral suitability of an activity for yielding a profit. For instance,\ngathering and trading in rare post stamps is intended for that, whereas\ngambling at a casino is not. Pursuit of profit means that you seriously seek to\nmake profit. Only those who are seriously committed to an activity and expend\nthe necessary time and effort for that can be said to pursue profit.<\/p>\n\n\n\n

Making a Distinction\nIf You Run a Farm<\/strong><\/h3>\n\n\n\n

On 3 August 2018 the Federal Court decided case\n2C_548\/2018, where, instead as (additional) self-employment, running a farm had\nbeen classified by tax authorities as pursuit of a hobby. Residing in the\ncanton of Aargau, the taxpayer had been employed as a full-time mechanic. In\naddition, he had run a farm, which, until 2011, had been classified as\nself-employment. For 2011, the taxpayer had reported an operational loss of CHF\n66,625. The competent tax committee had not approved it and unexpectedly reclassified\nrunning a farm as a hobby, which had resulted in rendering the business\nproperty private. This operation had yielded a liquidation gain of CHF 81,107, resulting\nfrom the total of allowable deductions from the business assets, which had been\nmade as commercially reasonable so far, less social insurance contributions. Having\nlost several times before lower courts, he had brought the case before the\nFederal Court, where he argued that the operational loss of CHF 66,625 had not\nbeen set off and the liquidation gain of CHF 81,107 had been forfeited.<\/p>\n\n\n\n

The Federal Court upheld the view of the\nprevious court whereby it should be assumed that the 2011 activity consisted\nrather in pursuing a hobby than doing business as the farm should be denied being\nconsidered as bringing appropriate profit\n(objective aspect of self-employment) or pursuing profit at all (subjective aspect). The full-time\nemployed taxpayer had not had enough time to take care of the farm business as\na profession. The fact that the taxpayer, in the controversial year of 2011, made\na turnover of just CHF 6170 as a fruit and plant grower was also taken into\naccount to support the view of the judges. The Federal Court also said no to\nthe deductibility of business losses because no business activity has been\nconducted. An allegedly positive cashflow does not make any difference here because\nwhat is crucial for the taxation of the self-employed is the income seen as\nsuch under commercial law, and in the 2011 tax return it was reported to be\nnegative.<\/p>\n\n\n\n

Do you have any innovative business idea you would like to make come true? Use STARTUPS.CH experts to become self-employed.<\/p>\n\n\n\n\u00bb Startups Scene<\/a>\u00bb Found online<\/a>\n","protected":false},"excerpt":{"rendered":"

The distinction between doing business and pursuing a hobby is often not fully clear. It is crucial, however, because engagement in activities can obtain various classifications under tax law. According to the Federal Court, there are two elements that decide whether you do business or not: appropriateness of profit and pursuit of profit. Nonetheless, each […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"footnotes":"","jetpack_publicize_message":"Distinction Between Doing Business and Pursuing a Hobby #distinction #business #hobby #taxlaw #startupsch","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[4],"tags":[],"jetpack_publicize_connections":[],"aioseo_notices":[],"views":1435,"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p54Pb1-1ch","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/posts\/4605"}],"collection":[{"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/comments?post=4605"}],"version-history":[{"count":1,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/posts\/4605\/revisions"}],"predecessor-version":[{"id":4607,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/posts\/4605\/revisions\/4607"}],"wp:attachment":[{"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/media?parent=4605"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/categories?post=4605"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.startups.ch\/en\/wp-json\/wp\/v2\/tags?post=4605"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}