Reminder of the intercantonal implication of employee expense agreements

One year after clarification by the Swiss Tax Conference: reminder of the intercantonal implication of employee expense agreements

May 1, 2025, will mark the first anniversary of the publication by the Swiss Tax Conference (STC) of its clarification on the intercantonal scope of business expense agreements.

As this deadline approaches, we feel it is useful to take a look back at this important change in tax practice. Although it has been in force for almost a year, its practical consequences continue to be a challenge for many companies.

What is it all about?

In its May 1, 2024 publication, the STC specified that approval of an employee expense agreements by one canton no longer has a binding effect on other cantons.

In concrete terms, an employee expense agreement validated in one canton (often that of the employer's head office) can no longer be automatically recognized in all employees' cantons of residence. Until now, this informal recognition allowed for a degree of administrative simplification.

From now on, only the employee's canton of residence is competent to accept or reject the application of an employee expense agreement, but it has the right to deviate from it only if certain conditions are not met.

What are the conditions under which a taxpayer's canton of residence is bound by expense regulations approved by the canton where the head office is located?

Fee schedules must comply with the STC models dated February 1, 2024 and with the Guide to drawing up salary certificates;
Flat-rate representation expenses must correspond to actual expenses incurred by the employee - this is a flat-rate reimbursement, not a benefit;
Above CHF 6,000 per year, these expenses must not exceed 5% of gross salary, including variable elements (bonuses, etc.);
Lump-sum representation expenses must not exceed CHF 24,000 per year.

Concrete illustration: the case of Geneva - Vaud

Let's take an example: an employee domiciled in the canton of Vaud benefits from an expense agreement from his Geneva employer, based on the more generous practice in the canton of Geneva, which grants him a lump-sum representation expenses of CHF 30,000 yearly.

In this situation, the canton of Vaud is not obliged to automatically accept the Geneva agreement, insofar as it exceeds the limit set by the STC.

The authorities of the canton of residence - in this case Vaud - retain their discretionary powers and may refuse to apply this regulation. They will examine the person's position, responsibilities and representative functions.

In any case, the amount will be reduced to the maximum of CHF 24,000, but it is possible that the canton of Vaud may consider this amount too high following its analysis of the situation and grant, for example, only CHF 18,000 in representation expenses, which means that the employee will be liable for income tax on the difference of CHF 12,000. In the event of an AVS audit, it is also possible that the employer may be subject to an adjustment at this level.

For this reason, in a case such as this, it is recommended discussing the flat-rate representation expenses for employees in Geneva and Vaud with the tax authorities of the canton of Geneva and Vaud in order to avoid any future tax adjustments for the employees and their employer.