Company Cars: A Practical Benefit for Small and Medium Businesses (SMBs)
Kamilya -
January 10, 2025
Company cars are among the non-monetary benefits employers can offer their employees. This makes small and medium businesses (SMBs) more attractive to professionals seeking new opportunities, helping them stand out from the competition. However, many SMBs are deterred by the financial and administrative burden associated with maintaining a company car fleet. This is where car subscription services come into play. In this article, we explore the key benefits of this flexible mobility solution, even for company cars.
Business Vehicles in Switzerland: An Overview
Whether for self-employed individuals or employees, vehicles owned by a company are classified as company cars or business vehicles. There is a distinction between a car assigned exclusively to an individual employee and a vehicle fleet. The latter refers to shared pool vehicles, available to all employees for temporary use when needed.
Key Differences
Company Cars: Often allowed for private use and assigned to specific employees.
Pool Vehicles: Exclusively for professional use, such as client visits or material deliveries.
To qualify as a company car, the vehicle must be registered under the company's name. The company covers the costs of purchase, maintenance, insurance, and upkeep, which can be tax-deductible. Employees using company cars for private purposes must pay taxes on their private usage.
Private Use of Company Cars
Driving a stylish car privately without footing the bill is a highly attractive fringe benefit. Privately usable company cars are considered part of employee compensation and are subject to taxation.
Regulations and Usage Scenarios
Business-Only Use: If the car is solely for work-related trips, employees do not incur taxable benefits.
Private Use Allowed: Employees must record private mileage in a logbook for accurate tax declarations.
Flat Fee for Private Use: Employees pay a pre-agreed fee for private use, which rarely covers all costs. Specific rules must apply uniformly to all company cars within the business year.
Commuting
Commuting between home and work is not considered private or business use. If the employer allows business classification for commuting, these trips are counted as work-related but cannot be claimed as deductions in personal tax filings.
Tax Implications of Private Use
Private use turns a company car into a taxable benefit. Employers typically cover ongoing costs (e.g., taxes, insurance, fuel, service) since they can claim them as expenses. Employees must handle fuel costs for extended vacation trips and personal fines.
Methods for Calculating Private Usage
Flat Taxation: Employees add 0.9% of the car's net purchase price to their monthly income, with a minimum of CHF 150. Annually, this amounts to 10.8% taxable income.
Logbook Method: Users log every trip's date, purpose, and mileage. Digital logbooks are increasingly common, simplifying the process. Tax authorities use prior year records for income calculations.
Both methods are subject to social security contributions.
Buying, Leasing, or Subscribing to Company Cars
Purchasing a company fleet involves significant initial investment. As an alternative, businesses may opt for leasing or car subscription services.
| Advantages | Disadvantages | |
|---|---|---|
| Purchase | No mileage limits; tax-deductible purchase cost; vehicle is a company asset. | High upfront costs; capital tie-up; less flexibility with workforce changes. |
| Leasing | Low initial cost; preserves liquidity. | High monthly costs; administrative burden; fixed annual mileage limits. |
Advantages of Car Subscriptions for Businesses
Car subscriptions reduce the administrative hassle associated with company cars. With services like CARIFY, businesses benefit from:
Cost Transparency: Monthly fees cover all expenses except fuel, simplifying accounting.
Streamlined Fleet Management: Includes reminders for service schedules and easy workshop bookings.
Flexibility: Terms range from one month to four years, with adjustable mileage options.
Sustainability: Access to a wide selection of new and used cars, including electric vehicles.
Special Considerations
Third-Party Use
Employees’ spouses or family members can use company cars privately if stipulated in the vehicle agreement.
Cross-Border and Foreign Use
Swiss-registered company cars cannot be used indefinitely outside Switzerland. Only work-related trips are allowed as specified in the employment contract.
Liability in Accidents
Minor Negligence: Employees typically pay a symbolic fee or up to one month's salary.
Moderate Negligence: Similar penalties apply for slight speeding violations.
Gross Negligence: Full damage costs may be charged to the employee.
Conclusion
Company cars are a valuable incentive for attracting talent but pose financial and administrative challenges for SMBs. Leasing or car subscription services offer flexible and cost-effective alternatives. For businesses seeking efficiency and flexibility, car subscriptions are a compelling choice.
We at CARIFY would be happy to make you an offer – just contact us!
FAQs
At what salary is a company car worthwhile?
Generally, when the car’s value is around half the annual gross salary.
What is a company car?
A company-owned vehicle provided to employees for professional and sometimes private use.
How much is a company car worth in Switzerland
The value depends on the car's price and usage details, reflected in payroll documentation.
What are the costs for private use of a company car?
Private use typically involves a flat tax or detailed mileage tracking, subject to social contributions.