Excessive expenses: how tax authorities deal with them

The Swiss tax authorities scrutinise expenses to determine whether they are reasonable and professionally necessary. Excessive expenses are viewed critically. Here is an overview of how the authorities deal with such expenses:

1. reasonableness and necessity: the tax authorities assess whether the expenses are business necessary and reasonable. First class flights, for example, are often not considered reasonable if cheaper alternatives such as economy or business class are available. However, in some industries or for certain positions, these flights may be considered reasonable, but this is the exception.
2. deductibility: If the tax authorities determine that excessive expenses represent a significant private benefit, they may classify these expenses as non-deductible. They may decide that only a portion of the expenses corresponding to the reasonable and necessary portion is deductible.
3. documentation and justification: The taxpayer must provide detailed receipts and a plausible justification for the necessity of the high expenses.
4. tax consequences: Excessive and unreasonable expenses can lead to subsequent taxation. In cases of abuse or insufficient documentation, additional fines and interest on arrears may be levied.