In January 2016, the Swiss tax authorities introduced a general limitation on the tax deductibility of the costs for travelling to work. BDO explains what this means to you.
The changes affect many taxpayers in Switzerland, no matter if the taxpayers themselves pay commuting costs or if a company car is used.
On Federal tax level, CHF 3,000 is now the absolute maximum amount of commuting costs that can be deducted in the tax return. Many cantons have introduced similar limitations.
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Gordana Muggler is Head of Global Mobility and HR Services at BDO Switzerland.
Gordana and her team of tax specialists are here to support you and your family members on your personal tax situation.
Impact in the tax declaration
Previously, commuting costs were deductible with no upper limit.
Calculation example: hidden tax increases
For example, if someone commuted from Zurich to Schaffhausen (50 km each way) using his own car, costs of approx. CHF 15,000 were allowed as a deduction.
For the 2016 tax period, on the Federal tax level, a deduction of just CHF 3,000 is granted in exactly the same scenario. When filing a tax declaration, similar to the cap on the deduction for insurance premiums, either the actual amount claimed or the CHF 3,000 will be considered (whatever is lower).
There is nothing additional that needs to be done by the taxpayers — but unfortunately, also nothing that can be done to reduce the hidden tax increase if you are affected.
Public transportation: deductibles for federal taxes
The limitation also impacts individuals using public transport if the costs are higher than CHF 3,000. For example, if you purchased a 2nd class GA travel card for CHF 3,655, in your 2016 tax return only CHF 3,000 can be subtracted from the taxable income for Federal taxes.
Tax impacts when using a company car for commuting
When using a company car for commuting, it is required to calculate an additional taxable benefit.
If an employee has a company car and his journey to work is of 30 km one way, the total is calculated with a deductible of CHF 0.70/per km or a deduction of CHF 7,080 for 240 working days in the Canton of Zurich.
This value is given by multiplying 30 km x 2 x 0.70 x 240 = CHF 10,080. Of this sum, CHF 3,000 (the FABI lump sum) are to be subtracted, giving the employee the monetary benefit of CHF 7,080 because he is using a company car.
It is the taxpayer's personal responsibility to declare this in his tax return as additional income if the annual wage statement has a cross in Field F.
In addition, there is still the value of the private share of the company car (line 2.2 salary certificate), generally in the amount of 9.6% of the car's net purchase price. This remains unchanged; the respective amount only reflects private use and not commuting costs.
Commuters, as of tax year 2016, suffer a financial disadvantage compared to the previous situation, when the costs they deducted for commuting in earlier tax periods exceeded CHF 3,000.
This is already the case for a taxpayer living more than 10 km from his place of work and traveling twice a day there and back with his own car.
According to the information received from tax administrations, the limitation may even apply for international commuting costs, i.e. trips to the family in the home country may only be deductible up to the amount of CHF 3,000.