Deducting a vehicle and business expenses

The company car is among the most common expenses and, at the same time, among those most scrutinised by the tax authorities. The recurring question is simple: how much can I deduct? The answer depends on the actual use of the vehicle, on how it is acquired and on the ability to document that it truly serves the business. Setting the matter up well from the outset avoids tax adjustments and disputes over private use.

The principle: an expense justified by business use

In Switzerland a cost is deductible when it is justified by business use: it must serve to produce business income. A vehicle used for the business fits fully within this logic, with the related costs (fuel, insurance, maintenance, road tax, depreciation or leasing instalments). The delicate point is not deductibility as such, but the portion of private use, which cannot burden the company.

Private use: the share to be taxed

When an employee or the entrepreneur has the company car available for private purposes too, that benefit is income in kind. Swiss practice provides two routes:

• Flat-rate share: a monthly percentage of the vehicle’s purchase price (excluding VAT) is applied as the value of private use, to be entered on the salary certificate. It is the most widely used route for its simplicity.
• Actual calculation: a detailed logbook is kept distinguishing private and business kilometres, taxing only the actual private share.

The private share effectively reduces the portion of costs the company can treat as entirely its own: it is the mechanism by which the tax authorities prevent personal expenses from being offloaded onto the business.

Leasing or purchase

The choice between buying and leasing has different accounting and tax effects:

• Purchase: the vehicle enters fixed assets and is depreciated over its useful life. The tax authorities indicate maximum depreciation rates for vehicles, which it is wise to respect so as not to incur adjustments.
• Leasing: the instalments are operating expenses deductible in the year to which they relate. The vehicle normally does not appear among the assets, but the multi-year commitment must be assessed from a liquidity standpoint.

There is no answer valid for everyone: it depends on liquidity, expected duration of use and tax planning.

Other deductible expenses

Numerous recurring deductible expenses revolve around the vehicle, provided they are documented and consistent with business use:

• Fuel or charging energy.
• Insurance (third-party liability, comprehensive) and road tax.
• Maintenance, repairs, tyres.
• Interest expense on any financing.

The golden rule is the same for all business expenses: business justification and documentary proof. Invoices made out to the company, traceable payments and orderly accounts are the best defence in the event of an audit.

VAT and input tax recovery

If the company is subject to VAT (standard rate 8.1% from 2024), it can in principle recover the input tax on the expenses of the vehicle used for taxable activity. The private-use share, however, reduces the entitlement to deduction: the private portion must be corrected, consistently with the value attributed to private use for direct-tax purposes.

Common mistakes

• Not accounting for any private share on a car also used outside work.
• Depreciating beyond the reference tax rates and having the difference added back.
• Storing invoices poorly or making them out to individuals rather than the company.
• Recovering VAT in full while ignoring the correction for private use.

In summary

• The vehicle is deductible if justified by business use.
• The private-use share must be taxed, either flat-rate or via a logbook.
• Purchase (depreciation) and leasing (instalments) have different tax effects.
• Documentation and business justification uphold every deduction.

How we help you

We structure the tax management of the company vehicle: the choice between leasing and purchase, correct calculation of the private share, depreciation within limits and VAT recovery without disputes. Optimise your business expenses.