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Following the article "Approval of cantonal expense regulations" dated October 23, 2023, on the Federal Court's ruling of October 14, 2022.
The reply of the Swiss Tax Conference (so-called “Conference Suisse des Impôts” to the Federal Court's recent case law: how to apply expense regulations approved by the employer's canton in the the employee's canton of residence, conditions and limits.
To sum up, the Swiss Tax Conference (STC) brings together the 26 cantonal tax authorities and the Federal Tax Administration (FTA). The STC aims to standardize tax practices, particularly on matters of inter-cantonal importance.
After months of uncertainty following the breach opened by the Federal Court's ruling on October 14, 2022 (2C_804/2021) regarding the inter-cantonal scope of application of an expense regulation, the Swiss Tax Conference (STC) has provided a radical answer on the issue of representation fees. This response is detailed in its "Guidelines for the Mutual Recognition of Approved Expense Reimbursement Regulations," which were published on its website on May 6, 2024, and took effect on May 1, 2024.
It is specified that a taxpayer's canton of residence is bound by the expense regulation approved by the canton where the employer is based, only if the following rules are adhered to:
- Expense scales must be based on STC models and the Guide for Preparing the Salary Certificate;
- Lump-sum representation fee must match with to the actual expenses incurred by the benefiting employees (as it is indeed a flat-rate reimbursement of expenses);
- When representation expenses exceed CHF 6’000 per year, they must not exceed 5% of the gross salary (including variable pay items);
- The lump-sum representation fee amount cannot exceed CHF 24’000 in the employer’ canton (maximum recognized amount);
Considering the above, employees benefiting from lump-sum allowances in mot favourable place of practice (notably canton of Geneva) will not be able to claim them in their canton of residence, as the more generous Geneva practice does not consider the limit amounts set by the Swiss Tax Conference.
Thus, the authorities in the canton of residence retain their discretion over the amount of lump-sum representation fees allocated, especially considering the individual’s position, duties, and representation functions. In any case, said expenses must correspond to the actual expenses incurred by the employee and will be limited to a maximum of CHF 24’000.
For all practical purposes, here is a summary of the recent changes regarding expenses:
- Lump-sum representation fees, reported in the salary certificate, do not cover "other professional expenses", which can therefore be claimed as deductions by the taxpayer in their tax return (only the canton of residence has the authority to determine the admissible amounts, for more information discover our article "Deduction of lump-sum professional expenses: Federal Court decision 9C_643/2022 of 24 July 2023"
- Off-site expenses (ordered by the employer) are different from commuting expenses between home and the workplace. Thus, an individual who receives a flat-rate reimbursement for mileage allowances, based on an expense regulation approved by the canton where their employer is based, is binding for their canton of residence, which cannot decide to reclassify part of this allowance as taxable salary.
- Lump-sum expenses must closely match the actual expenses incurred by the benefiting employees in the course of their duties and cover minor expenses not exceeding CHF 50. The supplementary expense regulation for executive staff is binding for the employee's canton of residence, provided this regulation was established based on the new model of February 1, 2024, and complies with the calculation rules for these flat-rate amounts, with a maximum of CHF 24’000.
