VAT on expenses is a recurring source of questions for many Swiss companies. At first glance, it seems simple: an employee submits a receipt, the company reimburses the amount and records the expense. In practice, however, the process is more nuanced, especially when input tax, flat-rate expenses or incomplete receipts are involved.
Not every expense automatically entitles a company to deduct input tax. What matters is whether the expense has a business purpose, whether a valid receipt is available and whether VAT is shown correctly. These are common sources of accounting errors that can easily be avoided with a clear process.
This guide explains when VAT on expenses is deductible, which requirements must be met, which VAT rates are relevant and what SMEs should consider when handling receipts, flat-rate expenses and accounting entries.
If you would first like to understand the basics of expense claims, read our complete guide to expense reporting in Switzerland.
What does VAT on expenses mean?
When employees incur business expenses, many of the receipts include VAT. This may apply to a business meal, hotel accommodation, a taxi, a train ticket or another work-related expense.
The main question for companies is whether the VAT included in the amount may be deducted as input tax.
In principle, this is possible if the expense has a business purpose and the formal requirements are met. VAT on expenses is therefore not simply an additional cost. If handled correctly, it can be taken into account in the company's VAT return.
However, the fact that an amount was paid is not enough. The expense must be documented transparently, a valid receipt must be available and the business reason for the expense must be clear.
When can input tax be deducted from expenses?
Input tax can be deducted from expenses if they have a business purpose and a valid receipt is available. In practice, this means that the expense must have been incurred in the company's interest and the receipt must contain the relevant information.
Typical examples include travel costs for a client meeting, hotel accommodation for a trade fair, a business meal with a client or transport costs incurred as part of a professional activity. Such expenses may generally be relevant for VAT purposes, provided the receipt is correct.
A valid receipt should show who supplied the goods or services, when the expense was incurred, the amount paid, what was purchased and which VAT rate was applied. If this information is missing, deducting input tax can quickly become problematic.
It is also important that the expense is genuinely business-related. A private expense does not become deductible simply because it is submitted through an expense claim. For mixed expenses in particular, the business-related portion should be documented clearly.
When is input tax not deductible?
Input tax is typically not deductible if there is no valid receipt, the expense is private or VAT is not shown correctly. Flat-rate expenses also require particular care from a VAT perspective.
The most common issue is a missing or incomplete receipt. Without a receipt, there is no sound basis for deducting input tax. This affects not only VAT, but also the traceability of the entire expense claim.
Flat-rate expenses also require caution. A flat rate can be a practical expense arrangement, but it does not automatically mean that any VAT included in it is deductible. Input tax generally requires a specific individual receipt that complies with VAT requirements. A flat-rate reimbursement alone is usually not sufficient.
Private or mixed expenses that have not been separated properly are also problematic. If, for example, a private dinner is declared as a business meal or a receipt does not indicate a clear business purpose, this creates unnecessary risk.
Which VAT rates apply to expenses?
Different VAT rates may apply to expenses. This is precisely why not every expense should be treated in the same way.
The standard rate is currently 8.1%. It applies to many typical expense items, including restaurants, taxis, services and certain transport costs.
The special rate for accommodation is 3.8%. This applies in particular to hotel stays. Mistakes are common in this area because hotel expenses are sometimes incorrectly recorded at the standard rate.
The reduced rate of 2.6% is less common for typical expenses, but may still be relevant in individual cases. The specific receipt and the VAT shown on it are always decisive.
The practical rule for SMEs is simple: do not guess, read the receipt. The correct VAT rate is normally shown on the invoice or receipt. If the document is unclear, the item should not automatically be recorded with input tax.
Example: calculating VAT on expenses correctly
Let us take a client meeting away from the company's usual location:
- Taxi to the meeting: CHF 38.00 including 8.1% VAT
- Business meal with the client: CHF 120.00 including 8.1% VAT
- Parking fees: CHF 12.00 without VAT shown
This example shows why expenses are not simply a matter of reimbursement. Input tax may be deducted for the taxi and business meal if the receipts are correct. It often cannot be deducted for the parking fees if no VAT is shown.
VAT must also be extracted from the gross amount. If a business meal costs CHF 120.00 including 8.1% VAT, the VAT included is not CHF 9.72, but approximately CHF 8.99. This is because the CHF 120.00 already includes VAT.
The simplified formula is:
VAT amount = gross amount × VAT rate / (100 + VAT rate)
For CHF 120.00 including 8.1% VAT, the calculation is:
CHF 120.00 × 8.1 / 108.1 = CHF 8.99
This distinction is important. Anyone who simply adds VAT to the gross amount will calculate it incorrectly.
VAT on flat-rate expenses
Flat-rate expenses simplify reimbursement, but they are not automatically straightforward from a VAT perspective. A flat rate replaces individual proof for certain expenses, but it does not create a separate VAT receipt.
This means that even if a flat rate is correctly arranged under employment or tax law, the company is not automatically entitled to deduct input tax on it. Input tax generally requires a specific receipt showing VAT.
For example, an employee receives a flat-rate meal allowance but does not submit a restaurant receipt. The allowance may work as an internal expense arrangement, but there is no receipt showing VAT on which to base an input tax deduction.
Companies should therefore separate actual expenses from flat-rate expenses clearly. Actual expenses supported by receipts may be relevant for VAT. Flat rates without individual receipts are generally unsuitable for input tax deductions.
VAT on foreign expenses
Foreign expenses are somewhat more complex. When employees incur expenses abroad, receipts often include foreign VAT. This cannot simply be deducted as input tax in the Swiss VAT return.
A hotel receipt from Germany, a restaurant bill from Italy or a taxi fare in France is not subject to Swiss VAT. Such amounts are treated differently in Swiss accounting from a domestic receipt that includes Swiss VAT.
Companies should therefore record foreign expenses clearly as such. Depending on the amount and country, separate refund procedures may be available, but these are not the same as the normal input tax deduction in the Swiss VAT return.
For day-to-day SME accounting, a simple rule is often sufficient: record Swiss VAT as input tax only if Swiss VAT is shown on the receipt.
How are expenses with VAT recorded?
Expenses are recorded as costs in the accounts. If VAT is shown correctly and the requirements are met, the input tax portion is recorded separately.
If an employee pays the expense privately, the cost and input tax are typically recorded against a liability to the employee. When the amount is reimbursed later, the liability is settled through the bank account.
In simplified form, the accounting logic is:
Expense / input tax to employee payable
Later, when the reimbursement is paid:
Employee payable to bank
The process is slightly different when a company credit card is used. In this case, the counter-entry is posted to the credit card account rather than to the employee. The same principle still applies: the expense, input tax and payment method must be separated correctly.
Common mistakes with VAT on expenses
The most common mistake is a missing or incomplete receipt. Without clear documentation, the input tax deduction becomes uncertain and any later review of the expense claim becomes unnecessarily complicated.
Another common mistake is applying the wrong VAT rate. Hotel receipts in particular are often handled incorrectly because accommodation is subject to a different rate from many other services.
Flat-rate expenses are also frequently recorded incorrectly. A flat rate is not the same as a VAT receipt. Companies that automatically record input tax on flat rates risk submitting an incorrect VAT return.
Mixing private and business expenses is another problem. If the business purpose is not documented clearly, uncertainty can arise even when a receipt is available.
Why digital processes help
VAT on expenses is particularly prone to errors when the process is manual. Receipts are sent by email, information is missing, VAT rates are entered by hand and questions only arise weeks later.
Digital expense processes reduce exactly this friction. Receipts can be captured directly, read automatically and assigned to the correct category. At the same time, the system can suggest VAT rates and identify missing information early.
The main advantage is not only faster data entry. Expenses become part of the accounting process immediately. A receipt can be turned into a clean accounting entry more quickly, including VAT, category and payment method.
This is the difference between a simple digital template and a genuinely efficient process.
Conclusion
VAT on expenses in Switzerland is generally manageable when the fundamentals are in place. The decisive factors are a business purpose, a valid receipt, the correct VAT rate and accurate accounting.
SMEs benefit from setting clear rules at an early stage. Companies that collect receipts properly, handle flat-rate expenses correctly and avoid entering VAT manually based on guesswork reduce errors and save time in accounting.
VAT is only one part of the overall process. What ultimately matters is a reliable expense reporting process, from capturing receipts to recording the accounting entries.
The aim is not to make expenses more complicated. It is to turn every expense into a traceable, correctly recorded item.
If you do not want to manage expenses, receipts and accounting separately, it is worth considering a solution that brings these steps together directly.
FAQs about VAT on expenses
Can VAT on expenses be reclaimed?
Yes, provided the requirements for deducting input tax are met. The expense must have a business purpose and there must be a valid receipt showing VAT.
Is a receipt always required to deduct input tax?
In practice, yes. Without a valid receipt, there is no basis for claiming the VAT included in the amount as input tax.
Can input tax be deducted from flat-rate expenses?
Generally not if no individual receipt showing VAT is available. Flat-rate expenses and actual expenses should therefore be separated clearly.
Which VAT rate applies to hotel expenses?
The special rate of 3.8% currently applies to accommodation in Switzerland. Other services on the same hotel invoice may be shown separately and subject to different rates.
How is VAT calculated from a gross amount?
If the amount already includes VAT, the VAT is extracted from the gross amount. At 8.1%, the formula is: gross amount × 8.1 / 108.1.
