In high‐latitude and mountain regions, local processes such as redistribution by wind, snow metamorphism and percolation of water, produce a complex spatial distribution of snow depths and snow densities. With its strong control on the ground thermal regime, this snow distribution has pronounced effects on ground temperatures at small spatial scales which are typically not resolved by land surface models (LSMs). This limits our ability to simulate the local impacts of climate change on for example vegetation and permafrost. Here, we present a tiling approach combining the CryoGrid permafrost model with snow microphysics parametrizations from the CROCUS snow scheme to account for sub‐grid lateral exchange of snow and water in a process‐based way. We demonstrate that a simple setup with three coupled tiles, each representing a different snow accumulation class with a specific topographic setting, can reproduce the observed spread of winter‐time ground surface temperatures (GST) and end‐of‐season snow distribution for a high‐Arctic site on Svalbard. For the three‐year study period, the three‐tile simulations showed substantial improvement compared to traditional single‐tile simulations which naturally cannot account for sub‐grid variability. Amongst others, the representation of the warmest and coldest 5% of the observed GST distribution was improved by 1‐2°C, while still capturing the average of the distribution. The simulations also reveal positive mean annual GSTs at the locations receiving the greatest snow cover. This could be an indication for the onset of localized permafrost degradation which would be obscured in single‐tile simulations.