When a company provides employees with a company vehicle which can be used for private purposes as well, the private use qualifies as a paid service to the employee. This services is taxable against the standard 7.7% VAT rate in Switzerland. As a rule, the corresponding value is determined on a lump-sum basis which is currently 0.8% per month on the purchase price excluding VAT, but not less than CHF 150,00 As per January 2022, the rate will change from 0.8% to 0.9%. whereby the value calculation includes VAT.

The flat-rate determination of private use is only permitted if certain conditions are met. It is only applicable to passenger cars with a permissible total weight of up to 3,500 kg for the transport of a maximum of 9 people including the driver and the vehicle must be used primarily for business purposes (so more than 50%). Otherwise, the calculation of private use must be based on the effective method.

Example

A company vehicle with a purchase price of CHF 43,000 (excluding VAT) is provided to an employee that can be used for private purposes as well. From 2022, a monthly rate of 0.9% needs to be applied on the purchase value which is CHF 387 per month. This needs to be multiplied by 12 months to calculate the value on a lump-sum basis. In this case CHF 4,644.00 which is the value including VAT. The annual VAT due on the private use of lease cars would be in this example CHF 332.00 (CHF 4,644.00 / 107.7% * 7.7%).

If the employee has to make a contribution to the costs for the private use of the company vehicle and the amount reduced by this contribution is listed in the wage statement of the employee, the remuneration to be paid by the employee must be settled in addition to the reduced amount as shown on the wage statement.

In the case of leasing vehicles, the calculation basis is the cash purchase price (including any special equipment), excluding VAT, set out in the leasing contract instead of the purchase price. This cash purchase price is also the basis for the flat-rate calculation when the vehicle is taken over after the contract has expired or has been terminated. This even if a separate sales contract is concluded after its expiry or termination.

The basis of calculation for rented vehicles is the market value of the vehicle at the beginning of the rental. This value must be proven by the taxable person using suitable documents. Without proof of this market value, the flat-rate determination of private use is always based on the new car price.

23 Dec 2021 at 9:40 am

3 min

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Switzerland VAT alert – Changes January 2022 on calculating rate private use company vehicles under lump-sum method