Vaud is preparing its tax authorities for a new phase

The Canton of Vaud is streamlining its tax administration. Following a governance audit, the authorities have announced a reorganisation of the Directorate-General for Taxation, with a clear objective: to make the tax system’s operations clearer, more predictable and better equipped to cope with the major reforms on the horizon.

For SMEs, the self-employed and their tax advisers, the stakes are not merely institutional. The announced abolition of the rental value allowance, the introduction of individual taxation and the requirements relating to the minimum tax on large groups are changing the tax landscape against which decisions on investment, remuneration, pensions, financing and business succession are made. Even where the measures do not directly target all businesses, they may alter the administrative burden, the requirements for supporting documentation and the way in which businesses interact with the tax authorities.

The Vaud tax administration set to become more transparent

The Canton of Vaud has unveiled plans to modernise its tax administration following a governance audit carried out by BDO. According to the cantonal statement, the new organisation is due to be fully in place by 2028 and forms part of a tax strategy based on clear, stable and transparent rules. Radio Chablais reports that this reorganisation is intended to enable the administration to cope with forthcoming new legislation.

Le Temps, for its part, reports that the audit highlighted an excessive concentration of decision-making power and a lack of transparency in the administration’s operations. The daily newspaper emphasises that the Directorate-General for Taxation intends to make the application of the rules more predictable, both for taxpayers and for its own staff. For a business, this predictability is a very practical concept: it determines the degree of certainty with which one sets aside a tax provision, documents a transaction or chooses a remuneration structure.

In practice, a more transparent administration can reduce grey areas, but it may also be accompanied by increased formalisation. SMEs in Vaud should therefore expect an environment where dealings with the tax authorities may be more structured, with greater emphasis placed on the traceability of decisions, well-documented files and consistency between accounts, tax returns and the positions taken in dealings with the authorities.

For trust companies, the message is twofold. On the one hand, a more transparent administrative approach facilitates the provision of advice and minimises surprises. On the other hand, this development reinforces the importance of a defensible tax file: minutes, contracts, expense receipts, executive remuneration policy, and documentation of transactions with related parties or affiliated companies. The clarity promised by the tax authorities is no substitute for the taxpayer’s own rigour.

Rental value: a property change that goes beyond the private sector

Among the major deadlines mentioned is the abolition of rental value, scheduled to come into effect from 1 January 2029 according to Radio Chablais. Rental value generally corresponds to a taxable income attributed to a homeowner who lives in their own property. Its abolition primarily concerns personal taxation, but its effects may indirectly affect business owners.

Many SME directors and self-employed individuals combine residential property, business premises, mortgage debt, pension provision and remuneration in their wealth planning. A change in the tax treatment of home ownership may influence the trade-off between debt repayment, maintaining liquidity, investing in the business or paying dividends. For a self-employed person working partly from home, it will also be important to remain mindful of the distinction between private and business use, particularly when expenses relating to the use of a workspace are claimed.

It would be unwise to draw definitive conclusions for every taxpayer at this stage. The effects will depend on the specific rules applicable, the household’s profile, its level of debt, the type of property and the individual’s professional situation. However, the announced deadline already sends a clear signal: owner-managers should avoid making tax decisions based solely on the current regime. Any strategy involving personal debt, property, pension provision or business income should factor in the possibility of change.

Individual taxation will increase the burden of tax returns

Another major reform: individual taxation, scheduled for 1 January 2032 according to Radio Chablais. The principle is that each spouse in a married couple would file their own tax return. For the Vaud tax authorities, this means more calculations and more files to process, which partly explains the announced reorganisation.

For SMEs, the impact may seem remote at first glance. It is not entirely so. In many small businesses, the spouse is involved in the business: as a salaried employee within the company, providing administrative support, carrying out one-off assignments, running a parallel self-employed business, holding a stake in the capital or playing a role in management. Individualised taxation will make the distribution of income between the two partners even more apparent.

This change is likely to encourage family businesses to ensure their documentation is in order. Where a spouse is an employee of the business, their remuneration must correspond to actual work carried out and be justifiable in light of the tasks performed. Where there are advances, rent payments, interest, dividends or other payments between the company and the director’s relatives, economic consistency will be essential. Individual taxation does not in itself create these requirements, but it may increase the level of detail required in tax analysis.

HR departments and trustees will also have a role to play in explaining the situation to staff. A change in the reporting approach may have implications for how the household’s tax burden is perceived, for advance tax payments, for decisions regarding working hours, or for pension planning. Here again, the exact impact will need to be assessed on a case-by-case basis, but it is in companies’ interests to anticipate these issues rather than be caught off guard when tax returns are filed.

Large groups, GloBE and the knock-on effect on suppliers

The Vaud roadmap mentioned by Radio Chablais also incorporates current federal and international requirements relating to the minimum taxation of large groups, with reference to GloBE. This mechanism targets multinational groups of a certain size and not the majority of local SMEs. It would therefore be incorrect to conclude that all companies in Vaud will be directly subject to these rules.

However, the standards applicable to large groups often have a knock-on effect. An SME acting as a supplier, subcontractor or local subsidiary may be asked by a client or parent company to provide more detailed information: accounting data, evidence of economic substance, organisational charts, allocation of functions, intra-group contracts and reporting details. Even when a company is not itself within the scope of an international rule, it may still have to provide data to a partner that is.

For companies in the Canton of Vaud that form part of a group, coordination between local accounting, Swiss tax affairs and consolidated reporting therefore becomes increasingly important. Closing entries, deferred taxes, transfer pricing and the classification of certain expenses must be handled systematically. An independent SME does not necessarily need a complex system, but it stands to benefit from maintaining accounts that are accurate, reconcilable and comprehensible to a third party.

Changes to watch out for regarding advance payments, provisions and case files

The announced reorganisation does not call for a hasty reaction. Rather, it requires disciplined management. Business leaders in Vaud should identify the areas of their tax situation that are likely to be affected: property owned by the business owner, the spouse’s involvement in the business, the structure of salaries and dividends, private or commercial debts, dealings with associated companies, and membership of an international group.

From an accounting perspective, the forthcoming reforms call for a regular review of tax provisions. A provision is not merely a mechanical calculation: it reflects an estimate of the probable tax liability, based on the known situation at the balance sheet date. When the tax framework changes, it becomes all the more important to document the assumptions made. For an SME, this can help avoid unpleasant cash-flow surprises at the time of taxation or when advance tax payments are adjusted.

Advance tax payments also merit particular attention. A growing business, a self-employed person whose income fluctuates significantly, or a director who changes their remuneration should not wait for the tax assessment to calculate the difference between the expected tax and the actual tax. In a canton that has announced its intention to improve efficiency and predictability, dialogue with the tax authorities can become more constructive if requests are prepared in advance, quantified and supported by clear supporting documents.

Finally, the transparency promised by the canton does not mean that the rules will become straightforward in every case. The tax situation of an SME often lies at the intersection of several factors: corporation tax, the executive’s income tax, VAT, social security contributions, pension provision, financing and succession planning. The announcements from Vaud should therefore be seen as a call to prepare. Businesses that have organised their supporting documents, contracts and planning will be in a better position when the reforms enter the implementation phase.

The initiative launched in Lausanne goes beyond mere administrative procedures. It reflects a strong expectation: a tax authority capable of applying the rules in a comprehensible and consistent manner, within an increasingly complex tax environment. For SMEs in Vaud, the best response is not to wait until 2029 or 2032, but to start treating taxation now as a management tool rather than an issue to be dealt with in a rush.