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Old 25.08.2007, 19:30
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Expenses are taxed?? Say it isn't so!!!!

Hello,

I'm an IT contractor and will be taking a contract in Switzerland for one year. I do not have a company but instead am working through a management company.

I've been talking to some friends who have worked in Switzerland under the same conditions and have told me that expenses (with receipt) are taxed in Switzerland.

This doesn't seem to make very much sense to me. Say I spend 4 nights in a hotel or have to put petrol on the client's company car (which I can use to get to the office). Let's also say I pay cash with my own money. Collect the receipts and expense it to the management agency who then expenses it to the customer. This is taxed? I don't see why this should be taxed. I can understand a per diem being taxed but expenses.... seems strange (I've never seen this!)

Are expenses (in the way I described) taxed???

Thanks
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Old 25.08.2007, 19:44
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Re: Expenses are taxed?? Say it isn't so!!!!

Hello Naza,

Had exactly the same discussion with the Finance guys of my company yesterday... In short, the answer is yes. After a certain value expensse * can * (and will) be taxed. There are estimated rates for kilometers, food, and when you exceed that a certain ammount of money you are taxed. What didn't become clear to me after the discussion was what does the law says or what is company policy. Another concern that is quietly growing inside me is the miles i am collecting - are they taxed? Am i allowed to keep them, or do they belong to the company? Actually, i was considering doing a similar post myself... With all the ammount of travelling i have to do, and the sort of hotels i have to stay, i'll soon will have to get a second job to pay for the day job expenses

Thanks,

Lucy
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Old 25.08.2007, 20:03
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Re: Expenses are taxed?? Say it isn't so!!!!

I am stuffed then, I spend my life travelling around Europe and expenses are normally > 6K / month
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Old 25.08.2007, 22:34
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Re: Expenses are taxed?? Say it isn't so!!!!

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After a certain value expensse * can * (and will) be taxed. There are estimated rates for kilometers, food, and when you exceed that a certain ammount of money you are taxed.
Do you know if there is any documentation/tables regarding allowable limits for expenses?

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With all the ammount of travelling i have to do, and the sort of hotels i have to stay, i'll soon will have to get a second job to pay for the day job expenses
WOW!!! I'm in trouble as well. I also have lots of expenses with travel and accomodation. A 2nd job.......

Thanks.
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Old 27.08.2007, 12:20
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Re: Expenses are taxed?? Say it isn't so!!!!

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Hello Naza,

Had exactly the same discussion with the Finance guys of my company yesterday... In short, the answer is yes. After a certain value expensse * can * (and will) be taxed. There are estimated rates for kilometers, food, and when you exceed that a certain ammount of money you are taxed. What didn't become clear to me after the discussion was what does the law says or what is company policy. Another concern that is quietly growing inside me is the miles i am collecting - are they taxed? Am i allowed to keep them, or do they belong to the company? Actually, i was considering doing a similar post myself... With all the ammount of travelling i have to do, and the sort of hotels i have to stay, i'll soon will have to get a second job to pay for the day job expenses

Thanks,

Lucy
The issue of expenses is an interesting one and many people can be confused by exactly what the regulations say and then exactly how they are interpreted and why. Put simply anything that is not part of a scheme designed to cover your retirement or is part of some other form of insurance cover to the benefit of both employer and employee (ie unemployment insurance, cover for loss of earnings, cover for accident costs etc) is *potentially* liable to be taxed. Why is this so?

If you consider the situation of a single person company ie a self-employed person where is the line between legitimate business expense and private usage? It is very hard to define.
If you consider the situation of a limited company and an employee the same line is easier to define but the situation could easily exist where instead of paying out dollars, the company pays out beer tokens. All that is part of your "reward" for working is subject to tax. Some of it less so than other parts of it. here think about a car as an example of thinking - You need the car for work but you can also potentially use it privately so the taxman says keep a book of ALL journeys OR pay a nominal taxation on this benefit.

But surely that is unfair on the employee. Actually it is not really. All that the employee needs to do is to keep a record of where they have been and what actual expenses they have claimed with receipts. Copy of receipt is then necessary of course but this must not be an original. IF the employee then has expenses taxed this can be claimed back at the year end.

Of course this should not happen,i e the company should have thought about this and have an officially approved Expenses regulation. As long as this regulation is then respected there is no need to have any deductions made from expenses other than those that are described in the regulation ie car...
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Old 27.08.2007, 12:53
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Re: Expenses are taxed?? Say it isn't so!!!!

At my last job, I was given certain amount of money by the company to pay my expenses. I don't know it this is a "work around' of the tax issue (as I had no idea they might be taxed) or if this was so I wouldn't be out of pocket while the expenses were processed.
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Old 27.08.2007, 12:59
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Re: Expenses are taxed?? Say it isn't so!!!!

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At my last job, I was given certain amount of money by the company to pay my expenses. I don't know it this is a "work around' of the tax issue
As far as I know this is like a per diem so technically it was taxable (I think).

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All that the employee needs to do is to keep a record of where they have been and what actual expenses they have claimed with receipts. Copy of receipt is then necessary of course but this must not be an original. IF the employee then has expenses taxed this can be claimed back at the year end.
OK Richard, if I understood you correctly, If I keep the original of each receipt and I am taxed on the expenses, I can claim back the taxed portion at the end of the year? How is that done? Sorry for this question but I've never filed tax returns in Switzerland and form what I've read its going to be a challenge....

Thanks
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Old 27.08.2007, 13:03
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Re: Expenses are taxed?? Say it isn't so!!!!

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At my last job, I was given certain amount of money by the company to pay my expenses. I don't know it this is a "work around' of the tax issue (as I had no idea they might be taxed) or if this was so I wouldn't be out of pocket while the expenses were processed.
You are entitled to a maximum of 5% of your salary to cover out of pocket expenses. More than this needs the specific approval of the cantonal tax office.
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Old 27.08.2007, 13:10
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Re: Expenses are taxed?? Say it isn't so!!!!

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OK Richard, if I understood you correctly, If I keep the original of each receipt and I am taxed on the expenses, I can claim back the taxed portion at the end of the year? How is that done? Sorry for this question but I've never filed tax returns in Switzerland and form what I've read its going to be a challenge....

Thanks
You need to get a copy of the company expenses regulations. This should state how they handle expenses and what has been agreed with the local tax office. In it there might be a reference to a flat rate amount to cover out of pocket expenses. If this is the case there will be a value attached to it - usually SFr. 50. Any expenses under this you then cannot claim.

For larger expenses such as hotel stays you should always keep a copy of the reason for the journey and the receipts. If you are then taxed on this amount it must have been added to your salary. You then need to deduct the same amount as an actual expense of employment and submit all the receipts involved. The tax office will then come at you and will require reasons why you were staying and travelling ie purpose of visit. Once this has been provided you will get the money back and your company will get a rocket for charging tax on genuine expenses something which causes the tax office more work...

Why should the tax office get so upset? Any part of your income which is taxable, is also subject to AHV and ALV as it forms part of what is called naturallohn ie benefit in kind. They then need to go and do checks with AHV that this has been properly accounted for and where necessary rebate the amount etc. This causes them a headache.
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Old 27.08.2007, 14:37
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Re: Expenses are taxed?? Say it isn't so!!!!

Can I presume that recolation expenses can possibly be claimed in a similar way?

Ie., submit receipts to the tax office and explain that the EU meant the relocation costs to be reimbursed tax free, but they had been actually taxed at 50% because they were added as salary?

(My employer has already stated they cannot use the receipts in their present system).
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Old 27.08.2007, 15:05
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Re: Expenses are taxed?? Say it isn't so!!!!

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Can I presume that recolation expenses can possibly be claimed in a similar way?

Ie., submit receipts to the tax office and explain that the EU meant the relocation costs to be reimbursed tax free, but they had been actually taxed at 50% because they were added as salary?

(My employer has already stated they cannot use the receipts in their present system).
The tax office use two things. There is the tax law which is quite extensive and then there are the guidelines to interpretation. Anything that is not described in the guidelines can be interpreted whichever way and needs to then be referenced to law on appeal. If you are saying that your employer offered to pay your actual relocation expenses then this is not a benefit in kind and should not be taxed by the Swiss authorities. If it has been then this can be reclaimed as an error but your employer can make a correction to the salary statement he made removing it and returning the tax which is the preferred way. That reminds me, I need to pay myself...
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Old 25.11.2007, 21:06
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Re: Expenses are taxed?? Say it isn't so!!!!

does anyone know of a link for the tax law relating to the fact that relocation expenses should not be taxed? My husband has a local employment contract here in Zurich, and his company agreed to pay his relocation expenses. He has supplied them with all the receipts, yet they have fully taxed him on the amount - quellensteuer. He has spoken with them about it and they said that according to their advice they were correct in taxing the expenses.

I have checked the tax websites and couldn't find any document to show them that this should not be the case.

any help would be greatly appreciated.
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Old 28.03.2008, 12:16
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Re: Expenses are taxed?? Say it isn't so!!!!

I know this is a while since the last post, but I have the same question. A contribution to my relocation expenses has been added to my monthly salary and therefore has been taxed. As I had to fight to get any contribution at all, I am annoyed to say the least. Can I reclaim the tax, as Richard suggests?
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Old 28.03.2008, 20:31
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Re: Expenses are taxed?? Say it isn't so!!!!

Same for me too. The great relocation package was a strong factor for me moving over.. I was pretty upset when I saw my witholding tax for my first pay slip to be almost double what it should be owing to the fact that my relocation cover had been put in with my pay. So I instantly lost a third of my relocation money.
My relocation package also includes my company paying my first six months accomodation but they are also reimbursing that with my pay after I pay it myself which again means it get taxed and my tax percentage is raised (they are effectively paying part of my rent then!).

It's really frustrating. At the very least I hope at the end of the year to be able to get something back from my inflated tax rate in my first month!
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Old 30.03.2008, 19:26
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Re: Expenses are taxed?? Say it isn't so!!!!

There is a gray area between "Expenses" and "Fringe Benefits". Obviously fringe-benefits are tax relevant.

New guidelines became effective 1-Jan-2007 together with the new salary certificate. These guidelines have clarified the tax liability considerably. Example: 0.8% pm of company-car purchase price is deemed fringe benefit and added to taxable income. That is simpler than recording every trip in a detailed log book.

One tip to ameliorate the tax situation: Get the employer to pay the "expense" directly to the service provider. Example: if the employer pays MBA or other tuition fees directly to the school then, up to a limit, it is not a taxable fringe-benefit for the employee.
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Old 30.03.2008, 22:31
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Re: Expenses are taxed?? Say it isn't so!!!!

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Example: 0.8% pm of company-car purchase price is deemed fringe benefit and added to taxable income. That is simpler than recording every trip in a detailed log book.
Can I just check something here - I think I may have misunderstood how this works. My husband's company allows him to choose a car up to a value of 65'000 CHF. I read about this 0.8% a month thing before, and assumed that's the tax that he would pay, ie, 65'000 x 0.8% = 520 CHF tax a month.

But are you saying that they'll take that 520 and treat it like salary paid, so he'll instead just pay the tax on that amount? If so, woo hoo!

Anyone know for sure? Thanks a lot.

kodokan
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