Why cost recharging requires careful attention
Consultants, design firms, service companies and freelancers often advance costs on behalf of clients: train tickets, hotel stays, software licences, site materials or subcontractor services. The temptation is to simply add them to the invoice as an extra line item. In reality, the tax and accounting treatment depends on how the expense is contractually regulated and how it is presented to the client.
In Switzerland, the fundamental distinction is between pass-through expenses (advanced in the name and on behalf of the client, without mark-up) and mark-up recharges (third-party costs invoiced with a surcharge that forms part of your remuneration). VAT treats the two cases differently: a classification error can lead to excess tax due, audit risk or distortion of operating margin.
This guide explains the rules applicable in 2026, with practical examples for travel, materials and third-party services, and shows how to structure invoices and accounting — including with software such as Accountex — to avoid the most common mistakes.
Pass-through expenses vs mark-up recharge
Before invoicing, clarify with the client (ideally in the contract or quotation) whether third-party costs are simply reimbursed or whether you apply a surcharge. Here is a concise comparison:
| Aspect | Pass-through expense | Mark-up recharge |
|---|---|---|
| Definition | Third-party cost advanced and re-invoiced to the client at the same amount, without mark-up | Third-party cost invoiced with a surcharge (percentage or fixed amount) that forms part of the remuneration |
| VAT legal basis | Art. 24 para. 6 let. b VAT Act — exclusion from the tax base (transit items / Durchlaufposten) | Art. 24 para. 1 VAT Act — taxable consideration; the mark-up is taxable revenue |
| VAT on the recharge line item | As a rule excluded from the taxable base, if the requirements are met | The entire invoiced amount (cost + mark-up) is taxable |
| Applicable rate | None on pure reimbursement; the original supplier's VAT remains borne by the effective recipient | That of the main service (usually 8.1% or 2.6% for services/reduced-rate supplies) |
| Accounting treatment | Dedicated transit account (transit items); not revenue | Taxable revenue; the purchase cost goes to the income statement |
| Documentation | Original supplier receipt, ideally addressed to the client, + separate indication on the invoice («on behalf of the client») | Own invoice with description of the service; internal records for the mark-up |
| Typical example | SBB ticket purchased for the client and re-invoiced at CHF 85.00 (same amount) | Software licence purchased at CHF 500 and invoiced to the client at CHF 575 (+15%) |
VAT treatment: the five requirements for pass-through expenses
Under Art. 24 para. 6 let. b of the VAT Act, transit items (Durchlaufposten) are amounts received as reimbursement of expenses incurred in the name and on behalf of the client, excluded from the taxable base if shown separately and without surcharge. The FTA requires the following operational conditions, cumulatively:
- 1Contractual or operational obligation: the client commissioned the expense or approved it in advance; you act as intermediary, not as the final purchaser. Where possible, the supplier document is addressed to the client.
- 2Amount identity: re-invoice exactly the amount incurred (including the original supplier's VAT, if applicable), without any surcharge. No rounding in your favour, no «hidden commission».
- 3Transparency on the invoice: the line item must be clearly identified as expense reimbursement on behalf of the client, separate from remuneration for your own services.
- 4Effective recipient: the economic benefit of the expense belongs to the client; retain the supporting document that proves this (client name on the document, project reference, travel destination) and pass it on to the client.
- 5No economic risk: do not assume the risk of third-party supplier default as if it were your own operating cost; reimbursement is provided for in the contract with the client.
Watch out for even a minimal mark-up
Even a small surcharge — for example CHF 5.00 on a train ticket — transforms the entire line item into a taxable supply. In that case, charge VAT on the total amount (cost + surcharge) at the rate applicable to the main service. If you wish to compensate for administrative costs, a separate «Administration fee» line item, clearly identified and taxable, is preferable to a hidden mark-up on reimbursements.
Travel, materials and third-party services: practical rules
Each type of cost has specific nuances. Here is how to handle them correctly:
Travel and business trips
Train tickets, flights, taxis, parking and hotel stays can be reimbursed as pass-through expenses if the trip was ordered by the client and the receipts show the project reference. VAT on hotel stays (3.8%) and transport (8.1%) remains that of the original document.
If you invoice a «travel package» at a flat rate exceeding actual costs, the excess is taxable remuneration. Kilometres driven in your own vehicle follow agreed rates or the tax-recognised rate (from 2026, up to CHF 0.75/km for professional use of a private vehicle): if you re-invoice only the official rate without mark-up, treat it as reimbursement; if you apply a surcharge, the entire amount is taxable.
Materials and goods
Timber, electrical components, toner or other goods purchased for a specific client project can pass through as pass-through expenses if purchased on the client's instruction. On the invoice, state the material description, quantity and reference to the supplier document.
If you purchase generic materials for your own stock and allocate them to the client with a mark-up, this is a supply of goods or a taxable service — not a pass-through expense. VAT is calculated on the entire sales amount (usually 8.1% or 2.6% depending on the goods).
Subcontractor services
When a subcontractor invoices you but the service is for your end client, the situation is delicate. If you act as a mere intermediary and re-invoice the subcontractor's invoice without mark-up, you can treat it as a pass-through expense — provided the client contract provides for this and the subcontractor is identified.
If you integrate the subcontractor's service into your quotation at a single price (turnkey), the subcontract is your purchase cost and the price to the client is taxable remuneration. Do not mix the two approaches on the same invoice.
Licences, rights and administrative fees
Software licences, copyright fees, registration charges or notarial fees paid on behalf of the client are ideal candidates for pass-through recharging, provided the client is the economic beneficiary.
Bank charges (transfer fees) or postal costs purely linked to a client mandate can follow the same logic. A flat «case management fee», however, should be invoiced separately as your own service.
How to structure the client invoice
A correct invoice clearly separates remuneration for your own services from expense reimbursements. Recommended structure:
| Invoice section | Content | VAT |
|---|---|---|
| Own services | Consulting, design, labour — with description, quantity, unit price | 8.1% (or reduced rate if applicable) |
| Pass-through expenses | Separate line item «Expenses advanced on behalf of the client» with breakdown (date, supplier, amount) | Excluded from taxable base (state «Transit items Art. 24 para. 6 let. b VAT Act») |
| Mark-up recharges | Description of the service (e.g. «Supply and installation of materials») with all-inclusive price | VAT on the entire amount at the service rate |
| Attachments | Copy or list of original receipts (recommended for large amounts) | — |
Always include the reference to the mandate or contract (order number, specification). For amounts exceeding CHF 500–1,000 per individual expense, many clients and auditors require a copy of the original receipt: plan for this in your process.
Under the effective method, transit items excluded from the taxable base do not increase the VAT payable on your invoice: do not charge VAT on the reimbursement and do not deduct it as input tax on the transit. Under the net tax rate or flat-rate methods, check with your adviser whether reimbursements affect the taxable turnover figure.
Accounting under Swiss standards
From an accounting perspective, pass-through expenses must not inflate turnover or operating costs. The correct flow:
- 1Purchase: debit a dedicated transit account «Expenses on behalf of third parties» (transit items / Durchlaufposten), as a rule in class 1 or 2 of the chart of accounts, and credit cash, bank or creditors. Do not record the expense in the income statement and do not use standard account 1190 («Other short-term receivables») for this purpose.
- 2Recharge to client: debit the client receivable and credit the same transit account. The transit account balance returns to zero: no effect on the income statement.
- 3Mark-up recharge: debit the client receivable at the sales price, credit revenue (account 3xxx) and debit the purchase cost (account 4xxx/5xxx). VAT is recorded on the entire remuneration.
- 4Input VAT: if the expense is pass-through, the supplier's VAT is generally not deducted on your return, because you are not the effective recipient: pass the receipts on to the client. If instead you treat the cost as your own service or mark-up recharge, apply the ordinary input tax deduction rules.
With Accountex
Create separate expense categories for «Pass-through expenses — transit» and «Project costs with mark-up». Link each expense to the project or client from the moment of purchase, so that when invoicing you can automatically generate the reimbursement breakdown. Separating own services and pass-through expenses on the invoice reduces VAT errors and simplifies closing the transit account at month-end.
Five common mistakes to avoid
1. Charging VAT on pure reimbursement
Applying 8.1% to a pass-through expense makes the client pay tax that is not due and inflates your VAT return. Verify that the line item is correctly excluded from the taxable base.
2. Not charging VAT on mark-up recharges
Treating a marked-up recharge as a pass-through expense to «save» VAT for the client is a serious error: the FTA classifies the entire amount as taxable remuneration.
3. Mixing own expenses and pass-through expenses
A software subscription used for all clients is not pass-through. Only expenses clearly attributable to a single client mandate can be reimbursed.
4. Recording reimbursements as revenue
Recording pass-through expenses in the income statement distorts turnover and margin. Always use a transit account and verify that it balances to zero for each closed project.
5. Insufficient documentation
Without the original receipt and the link to the client mandate, an auditor or the FTA may reclassify reimbursements as taxable revenue retroactively.
Operational checklist before every invoice
Before issuing an invoice with recharge line items, check these points:
- Does the client contract or order explicitly provide for reimbursement of advanced expenses?
- Does each pass-through expense have a receipt with a project or client reference?
- Does the re-invoiced amount exactly match the cost incurred (no hidden mark-up)?
- Are pass-through line items separated from own services and marked as such?
- Do mark-up recharges show VAT on the total amount at the correct rate?
- Is the transit account in the books aligned with invoices issued and receipts filed?
- For expenses not recovered from the client within the agreed deadlines, have you provided for a reversal procedure?
A clear cost recharging process protects the client relationship, keeps the income statement clean and protects you from tax disputes. Define the rules at the start of the mandate, document every expense at the time of purchase and always separate reimbursements from your remuneration: these three habits eliminate most VAT and accounting problems.