Taxation of fringe benefits and the company car

A good remuneration package is not made up of salary alone. A company car, phone, housing, participations, vouchers: these are fringe benefits, benefits in kind that round out the pay. The tax position is clear-cut: almost all of these benefits are taxable income and must be declared on the salary certificate. Handling them badly exposes both the employee and the employer to tax adjustments and to problems with social security contributions.

What a fringe benefit is

A fringe benefit is any consideration the employer grants the employee in addition to the cash salary, in the form of a good, a service or a right. In principle, everything that represents a measurable economic advantage constitutes income from employment. The practical consequence: it must be shown on the salary certificate and, as a rule, is subject both to taxes and to social security contributions (AHV/IV/EO — state pension, disability and loss-of-earnings insurance —, ALV unemployment insurance, and BVG occupational pension where applicable).

The company car, the most frequent case

A vehicle also made available for private use is the fringe benefit par excellence. The private advantage is calculated in two ways:

• A monthly flat rate calculated as a percentage of the vehicle’s purchase price (VAT excluded), reported on the salary certificate.
• The actual accounting of private kilometres by means of a logbook.

The flat rate is the most widely used route because of its simplicity. What matters is that the private share is not left as a cost to the company as if it were entirely a business expense.

Board, lodging and other benefits

Beyond the car, many benefits recur in practice:

• Lodging and board provided free or at a preferential price: valued according to recognised reference amounts and added to income.
• Meal vouchers and gifts: small customary amounts may be tolerated, but beyond certain thresholds they become taxable.
• Subscriptions and phone for private use: they constitute an advantage if not strictly business-related.
• Employee participations and options: they follow specific rules on valuation and the moment of taxation.
• Contributions towards private expenses (insurance premiums, rent): income to all intents and purposes.

Some considerations are instead regarded as business expenses and not income, for instance the reimbursement of costs actually incurred for work in line with a recognised set of rules.

The salary certificate is the control point

The salary certificate is the document in which everything must appear transparently. The official guidance sets out which benefits must be reported, how to value them and in which fields to enter them. A correctly completed certificate protects everyone: the employee avoids assessments, the employer demonstrates that it has met its obligations as withholding and reporting party for social security purposes. Omitting a benefit or undervaluing it is among the most common causes of a tax adjustment.

The link with social security contributions

Fringe benefits taxable as employment income are, as a rule, also part of the calculation base for social security contributions. This means that an undeclared benefit in kind does not just create a direct-tax problem, but also an AHV one and one with the other insurances. Consistency between tax treatment and contribution treatment is essential: the authorities compare the data.

Frequent mistakes

• Not reporting the company car for private use on the salary certificate.
• Treating recurring “gifts” of value as non-taxable.
• Confusing actual expense reimbursements with benefits in kind.
• Declaring the benefit for tax purposes but not for AHV purposes, or vice versa.

In brief

• Almost every benefit in kind is taxable income.
• The company car is accounted for with a flat rate or a logbook.
• Board, lodging, vouchers and participations have their own valuation rules.
• The salary certificate must reflect everything, taxes and contributions included.

How we help you

We set up the tax and contribution treatment of fringe benefits, from valuing the company car to correctly completing the salary certificate, so that pay and benefits in kind stand up to any inspection. Bring your fringe benefits into compliance.