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New taxation solution for commuting by company car owners

Melanie Imper Senior Associate Treuhand/Corporate Support Services Switzerland, PwC Switzerland 14 Jun 2021

Since the implementation of FABI in 2016, employers have been obliged to certify a percentage of field work on their employees’ salary statements. This was the only way that travel costs for commuting could be correctly taxed. On 29 May 2018, parliament referred the motion on «FABI: excessive administrative burden for company car owners» to the Federal Council.

On 1 January 2022, the Federal Swiss Finance Department will enact the amendment to the Professional Costs Ordinance, whereby the costs of travel to the place of work will now also be taxed at the flat rate for private use of a company vehicle.

The Professional Costs Ordinance governs the deduction of travel costs for commuting by employees, which is limited to a maximum of 3000 Swiss francs. According to the annex to this regulation, the current flat-rate deduction allowance is 0.70 Swiss francs per kilometre travelled. The cantons have many different solutions whereby they either also apply an offsetting rule for which they allow unlimited amounts, or set upper limits according to cantonal law. In order that the commuting costs of employees with a company vehicle can be calculated, employers are obliged to show the proportion of field work on the salary statement. The private use of a company vehicle including the costs for commuting can now be taxed at 0.9% of the vehicle purchase price per month1). The flat-rate allowance of 0.8% will continue to apply until 1 January 2022. The amendment will in future reduce the administrative burden for employers and employees, but will increase social security contributions, withholding taxes and VAT.

What you need to look out for as of 1 January 2022

The new rule allows the employer to no longer declare the proportion of field work in the comments section on the salary statement (Switzerland-wide document), as the calculation for commuting and deduction of travel costs will be included in the new flat-rate allowance.

According to explanatory notes on the Professional Costs Ordinance, 20 cantons were against the new solution and it is therefore uncertain whether the cantons will also adopt this solution. If not, for certain cantons it might be possible that employers would still have to show the field work days with a separate certificate.

Taxable persons would of course also be able to calculate their actual private use with a logbook. This has been used less often in practice.

For service vehicles, a private usage proportion is not settled via payroll accounting because these vehicles cannot be used for private purposes (fixed installations, etc.). In those cases the employer still crosses box F of the salary statement for the commuting (free transport between work and home). According to our enquiries, this process is not affected by the changes.

The overall aim was to make things easier for everyone involved. It remains to be seen whether this is actually the case. A revised version of the instructions for filling out salary statements is currently not yet available.

1) It can currently be assumed that this increase will also be adopted in the VAT.

This amendment to the ordinance is designed to reduce the administrative burden for employers.

Effects of the increase

The new percentage of 0.9% means the following under the same circumstances: 60,00o Swiss francs (purchase price of company car excl. VAT) x 0.9% = 540 Swiss francs per month, or 6480 Swiss francs per annum.

The income that is subject to tax and social security contributions is increased by more than 700 Swiss francs in this example. This results in greater deductions for the employees and employers concerned, leading to higher taxes depending on the length of the commute. This variant may be advantageous for longer commutes.

The following example illustrates the higher deductions for employees and employers:

  • The employee lives in the canton of Berne, is subject to withholding tax and does not complete a tax return.
  • The employer is also based in the canton of Berne.
  • ­The commute is 8 kilometres (each way).
  • ­The purchase price of the company car is 60,000 Swiss francs.
  • ­All deductions with the exception of AHV/IV/EO and ALV are notional.
  • ­It is assumed that the increase to 0.9% does not have to be taken into account in the pension fund.
Situation up to and including 2021

 

Number/basis

Approach

Result

Monthly salary

 

 

7000.00 CHF

Private use of company car

60’000.00 CHF

0.80%

480.00 CHF

Gross salary

 

 

7480.00 CHF

OASI deduction

7480.00 CHF

5.30%

396.45 CHF

UI deduction

7480.00 CHF

1.10%

82.30 CHF

Non-occupational accident insurance deduction

7480.00 CHF

0.21%

15.70 CHF

daily sickness allowance insurance deduction

7480.00 CHF

0.37%

27.70 CHF

PF deduction, fixed

 

 

500.00 CHF

Withholding tax deduction (ann. A0Y Canton BE)

7480.00 CHF

14.70%

1099.55 CHF

./. deduction offset

 

 

480.00 CHF

Net salary

 

 

4878.30 CHF

Employer’s OASI contribution

7480.00 CHF

5.30%

396.45 CHF

Employer’s UI contribution

7480.00 CHF

1.10%

82.30 CHF

Employer’s occupational accident insurance contribution

7480.00 CHF

0.12%

9.00 CHF

PF deduction, fixed

 

 

600.00 CHF

Employer’s FAK contribution

7480.00 CHF

0.08%

6.00 CHF

Employer’s contribution to OASI administration costs

792.90 CHF

1.50%

11.90 CHF

Employer’s supplementary accident insurance contribution

7480.00 CHF

0.11%

8.25 CHF

Total employer costs

1113.90 CHF

Total employee deductions

2121.70 CHF

Situation from 2022

 

Number/basis

Approach

Result

Monthly salary

 

 

7000.00 CHF

Private use of company car

60’000.00 CHF

0.90%

540.00 CHF

Gross salary

 

 

7540.00 CHF

OASI deduction

7540.00 CHF

5.30%

399.60 CHF

UI deduction

7540.00 CHF

1.10%

82.95 CHF

Non-occupational accident insurance deduction

7540.00 CHF

0.21%

15.85 CHF

Daily sickness allowance insurance deduction

7540.00 CHF

0.37%

27.90 CHF

PF deduction, fixed

 

 

500.00 CHF

Withholding tax deduction (ann. A0Y Canton BE)

7540.00 CHF

14.70%

1112.15 CHF

./. deduction offset

 

 

540.00 CHF

Net salary

 

 

4861.55 CHF

Employer’s OASI contribution

7540.00 CHF

5.30%

399.60 CHF

Employer’s UI contribution

7540.00 CHF

1.10%

82.95 CHF

Employer’s occupational accident insurance contribution

7540.00 CHF

0.12%

9.05 CHF

PF deduction, fixed

 

 

600.00 CHF

Employer’s FAK contribution

7540.00 CHF

0.08%

6.05 CHF

Employer’s contribution to OASI administration costs

799.20 CHF

1.50%

12.00 CHF

Employer’s supplementary accident insurance contribution

7540.00 CHF

0.11%

8.30 CHF

Total employer costs

1117.95 CHF

Total employee deductions

2138.45 CHF

The cost increase per month for the employer comes to around 4 Swiss francs, and over 16 Swiss francs for employee.

The difference in VAT with the tax rate remaining the same is shown in the following example:

Private use settlement VAT to 31 December 2021

5348.20 CHF

7.70%

411.80 CHF

Private use settlement VAT from 1 January 2022

6016.70 CHF

7.70%2)

463.30 CHF

Difference in VAT on private use settlement for a year

51.50 CHF

2) Assuming the VAT rate is the same

Contact us

Melanie Imper

Melanie Imper

Senior Associate Treuhand/Corporate Support Services Switzerland, PwC Switzerland

Tel: +41 58 792 28 32