New tax regulations for the private portion of luxury vehicles in the canton of Zurich: effects on direct taxes and VAT
New tax regulations for the private portion of luxury vehicles in the canton of Zurich: effects on direct taxes and VAT
The Zurich Cantonal Tax Office has issued a new directive that will regulate the private share for luxury vehicles from the 2024 tax period. This change particularly affects principal shareholders of corporations and has an impact on both direct taxes and VAT.
Key points of the new directive:
- Increase in the private share:
- The previous flat rate of 10.8% of the purchase price (excluding VAT) for the private portion will be increased to up to 16% for luxury vehicles if the purchase price of the vehicle exceeds CHF 120,000.
- Wage statement and current account:
- Despite the increase, only the private portion of 10.8% will continue to be shown on the salary statement as income in kind.
- The difference between the increased private share (up to 16%) and the 10.8% must be invoiced to the shareholder or debited to the shareholder's current account.
- Effects on value added tax:
- For the VAT calculation, the salary statement is decisive for the free provision of the business vehicle for private use. The 10.8% of the purchase price will therefore be subject to VAT annually (the 10.8% corresponds to the amount including VAT).
- The additional private share to be debited to the current account is regarded as a "supply for consideration" to the shareholder and is therefore also subject to VAT.
Implications and challenges:
- Unequal VAT treatment:
- The new regulation of the Canton of Zurich leads to unequal VAT treatment compared to taxpayers in other cantons, which may apply different practices for direct taxes.
- Complexity of the declaration:
- The combination of the declaration on the salary statement and the debiting of the current account requires careful bookkeeping and can lead to complications in the tax declaration
- Increased tax burden:
- The private shares and the tax burden for those affected will increase.
The new directive of the Zurich Cantonal Tax Office represents a significant change in the tax treatment of luxury vehicles and requires a close examination of the associated consequences.