⏱ 13 min
It comes as no surprise, then, that electric mobility (e-mobility) is becoming increasingly important – not only in the private sector, but also when it comes to company vehicles. This article focuses on the tax challenges that companies face when converting to e-mobility.
How are company vehicles taxed in principle?
Company vehicles have a special significance for many businesses, serving not only serve as “work aids”, but also as an attractive instrument for incentivizing employees. Company vehicles are vehicles that belong to the company and in most cases can also be used by employees for private purposes, known as mixed use.
Employees’ private use of the company vehicle, whether for commuting or for private purposes, is subject to income tax as a salary component (non-cash benefit). This can be calculated either based on actual use (effective method) or as a lump sum.
Effective settlement
The effective method takes into account the actual costs incurred for the commute to work and other private journeys. The non-cash benefit is set at 0.70 Swiss francs per kilometre driven and must be stated in the salary certificate accordingly. A logbook must be kept by the employee as a prerequisite for settlement of actual costs.
Lump-sum settlement
In practice, however, the lump-sum method is predominantly used for settlement. This is generally more attractive for employees and makes the settlement process easier for the company.
According to the Professional Expenses Ordinance, the private share can be charged at a monthly lump sum equal to 0.9% of the net acquisition cost (excl. VAT), but at least CHF 150 per month. This covers both the depreciation and the running costs of the vehicle, and the employee only has to cover fuel costs for longer private trips, such as vacations. Especially employees with few business miles and a long commute benefit from the lump-sum settlement.
Tax sticking points in connection with company e-vehicles
Companies planning to convert their vehicle fleet to e-mobility face a number of challenges. Besides various operational issues (e.g. provision of charging infrastructure, ensuring range, etc.), tax issues also arise.
Which private share should be applied to company e-vehicles?
At first glance, it may seem trivial to ask about the different treatment of the private share of e-vehicles. However, it should be noted that the acquisition costs of e-vehicles are currently (still) significantly higher compared to equivalent combustion engine vehicles. On the other hand, the maintenance costs of e-vehicles are almost zero and their service life is longer. For frequent drivers, the total costs of e-vehicles are generally even lower than they are for conventional vehicles, meaning that e-vehicles are already extremely attractive from the employer’s perspective.
However, a somewhat different (clouded) picture emerges from the perspective of the employees, as only the acquisition costs (not the full costs) are taken into account when calculating the private share. This results in a tax disadvantage, which makes the switch to e-vehicles less attractive for employees.
The following example illustrates this:
| Overview (figures according to TCS) | Electric vehicle VW ID.4 Pro Performance |
Petrol vehicle VW Tiguan 2.0 TSI 190 Life 4Motion DSG |
| Purchase price | CHF 45'678 | CHF 41'055 |
| Taxable lump sum (0,9% x 12= 10,8%) | CHF 4'933 | CHF 4'434 |
| Annual operating costs for a total mileage of: 5'000 km | CHF 8'519 | CHF 9'230 |
Conclusion: The employee’s taxable private share is around CHF 500 higher for an equivalent vehicle, even though the operating costs for the e-vehicle are lower.
The Federal Council rejected a corresponding political proposal to reduce the private share for e-vehicles on 25 November 2020. This means that the same rules apply to e-vehicles as to combustion engine vehicles. What is clear is this: If e-vehicles become cheaper to purchase, as is generally expected, the potential monetary disadvantage will decrease accordingly.
How is the installation of a charging station (wall box) at an employee’s home treated for tax purposes?
Electricity prices vary greatly depending on the charging station. If employees can charge the vehicle at home using the night tariff, electricity is around 2-4 times cheaper than when using public fast-charging stations. For this reason, both the company and the employees have a strong interest in being able to charge the company vehicle at home or work if possible. Installing a charging station, also known as a wall box, at an employee’s place of residence therefore makes a great deal of sense. For this reason, many companies are keen to encourage the installation of charging stations at their employees’ homes in order to support the introduction of electric vehicles.
Employer finances the installation
It generally costs between CHF 3,000 and CHF 5,000 to install a wall box. A survey of various cantons reveals that if an employer covers the cost of a wall box, this generally constitutes a non-cash (fringe) benefit and must be declared on the salary certificate. This means that employees may be subject to an additional income tax burden in the year they convert to e-mobility. As the table below shows, there are only a few cantons that do not consider it (fully) as a salary component:
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Employer finances the wall box |
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| Canton* | Share of taxable salary component (fringe benefit) |
Allowance – non-salary component |
| AG | 100% | up to CHF 500** |
| BS | 100% | x* |
| FR | 100% | x* |
| GL | 100% | x* |
| GR | 100% | x* |
| LU | 100% | up to CHF 1'500 |
| NW | 50% | x* |
| OW | 50% *** | x* |
| SH | 100% | x* |
| SZ | 100% | x* |
| SO | 100% | x* |
| SG | 100% | x* |
| TG | 100% | x* |
| UR | 100% | x* |
| VS | 100% | x* |
| ZG | 0% | x* |
| ZH | 100% | x* |
* A survey was conducted among all cantons. Only cantons that provided substantive feedback are listed. Some cantons have not yet established their practice and therefore did not answer the questions.
** Coverage of costs of up to CHF 500 does not count as a salary component. The total amount paid by the employer may not exceed CHF 500. As soon as the employer assumes more than CHF 500 of the costs, the entire amount is taxable.
*** The private share for private use of the wall box is set at 50% in line with the current practice for the acquisition of IT hardware and software. If the employer contributes up to 50% of the total costs (= private share of 50%), this has no tax implications for the employee (i.e. there is no settlement). If the employer’s contribution to the costs exceeds 50% of the total costs, the employee will be charged the amount of the employer’s contribution minus 50% of the private share of the total costs as a taxable fringe benefit.
If the employee leaves the company shortly afterwards, there may be an obligation to reimburse the investment in the charging station. In this case, the question arises of whether and to what extent the reimbursement requested by the employer can be deducted from the employee’s taxable income. Individual cantons provide specific regulations to govern this situation.
Employee finances the installation
If employees pay for the wall box themselves, they cannot usually claim a tax deduction, either in the form of production costs for carrying out their occupation (tenant) or as maintenance costs for the property (property owner).
If the wall box is installed on the employee’s own property, however, the acquisition costs constitute value-adding investment costs. Only if the installation of the charging station takes place in connection with the transition to sustainable energy production can special regulations be applied in certain cantons. In this case, the costs can be deducted as maintenance costs if certain conditions are met, as the following examples from the cantons of Aargau, Bern and Zurich show:
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Aargau: For the initial purchase of a bidirectional charging/discharging station in combination with a photovoltaic system, two-thirds of the costs can be claimed as an energy-saving measure for an owned property and one-third of the costs constitute investment costs.
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Bern: The installation of an e-charging station can be claimed in full as maintenance if it is powered by the owner’s own photovoltaic system.
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Zurich: Costs for the permanent installation of a charging station are investments that serve to save energy and are therefore deductible as maintenance costs if the installation is carried out together with a photovoltaic system.
Any repair costs can typically be deducted by the owner of the property as maintenance costs.
Tenants are at a disadvantage, as the acquisition costs for the wall box are generally not tax-deductible for them. They can claim neither maintenance costs nor acquisition costs. In practice, it is therefore not insignificant whether employees live in a rented or a privately-owned property. Installation of the wall box by the owner of the property usually makes sense from a tax point of view - potentially involving the transfer of the costs as part of the rental agreement.
How is purchased electricity taxed?
As with fuel, there are also various ways to settle the electricity purchased for use with company e-vehicles:
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Effective method (actual use)
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Lump-sum settlement
Settlement according to the effective method requires technical and organizational measures as well as extensive infrastructure, including a communication module on the charging station at the place of residence. This remains a major challenge at present for many, and is associated with obstacles. Another disadvantage of the effective method is that it does not incentivize employees to avoid expensive fast-charging stations.
For this reason, many companies prefer lump-sum settlement. This also reduces the administrative effort and offers a simple and attractive solution. Employees’ electricity purchases (at their place of residence, workplace or public charging stations) are reimbursed as a lump-sum expense. The model expense regulations of the Swiss Tax Conference (SSK/CSI) provide for a lump sum of CHF 60 per month. This covers all costs for the private use of electricity for the electric vehicle. The lump-sum is shown in the salary certificate under section 13.2.3 with the note “Electricity reimbursement for electric vehicle”.
Although neither the tax authorities nor the compensation offices are bound by this recommendation, most cantons follow it and only deviate from it in isolated cases.
However, the lump sum for the purchase of electricity does not discriminate between business and private trips. If employees receive higher compensation because they travel long distances on business, any amount in excess of CHF 60 per month must be declared as a benefit in kind in the salary certificate. This can lead to an additional tax burden for employees. For example, if an employee travels about 30,000 km per year on business and the electricity price is about 30 Swiss centimes per kWH, compensation of about CHF 150 per month would be appropriate.
And how are e-bikes treated?
Electrification has also made inroads in the area of bicycles. The range and the minimal space needed make e-bikes an attractive option for company fleets as well. Nevertheless, most cantons do not tax the private share of e-bikes provided by a company. However, if the employer provides an e-bike for the commute to work, field F (free transportation between home and place of work) must be checked in the salary certificate.
Private e-bikes are generally treated in the same way as conventional bicycles. As a rule, a lump-sum deduction of 700 francs is allowed for the commute to work. Only the canton of Uri has a regulation allowing a deduction of 0.70 francs per km for the distance travelled by e-bike, as is the case for a car.
What conclusions can be drawn from a tax perspective regarding the use of e-vehicles?
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Like conventional vehicles, privately used company e-vehicles are also taxed at a lump sum equal to 0.9% of the purchase price per month.
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The installation of the charging infrastructure generally constitutes value-adding acquisition costs. If the employer bears the costs, these must usually be taxed as a salary component. There are cantonal differences and some cantons offer corresponding relief.
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The purchase of electricity for company e-vehicles is usually settled via a lump sum. In most cantons, the maximum permitted expense allowance is CHF 60 per month, although actual electricity costs are often higher. Higher compensation constitutes a taxable salary component.
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Many cantons do not yet have an established practice in dealing with company e-vehicles. Treatment is inconsistent in some cases and individual clarification is recommended in each case.
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As the discussion above shows, shifting to e-mobility can lead to a higher tax burden for employees. As a result, the tax treatment does not promote e-mobility in any way and can even hinder companies in making the switch. If inappropriate outcomes or tax burdens for employees are noted, it may be worth contacting the tax authorities to seek individual solutions.
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