If you’re withdrawing it, it’s a lot less clear this is about retirement. (Maybe if you keep it in the pension system, either the swiss one or your new residence country, there’s a good argument).
FWIW the swiss system is fairly simple, if there’s no economic reason for doing something except for avoiding taxes, then it should be taxed as if you didn’t do the thing (you don’t need to handle it explicitly in the law).
FWIW, structuring to avoid detection doesn’t mean it’s necessarily legal. (You’d need to some explicit safe harbor conditions for that, I don’t think being in different tax year changes the outcome massively, since the intent is the same).
I’ve heard this before in this forum when discussing pillar 2 buying, and while i believe this is a true reflection of the state of the system, i don’t understand how it makes any sense
i pay into pillar 3 in order to get the tax savings in assets that i am accumulating for my retirement. if this vehicle were not available i would do the same thing (buy global ETF) but outside of the tax sheltered account instead
the only reason I’m doing it is for the tax savings, it’s the only economic reason because the products on offer are strictly worse than what is accessible in the taxable universe, so by your argument it sounds like i should actually be taxed on it?
No because you put your money in some account that is only used for retirement purpose, so the desired goal was achieved (the tax benefit was created for the specific purpose of making you do that).
If you end up withdrawing it at retirement it served its purpose, right? (you can’t spend this money except for things allowed by law)
But this is also true for the case where it was denied.
The taxpayer paid into pillar 2, it will only be used for retirement. She stopped working and the pension was transferred into VB (as required by law) and again, is only used for retirement.
The tax authority come and say, you are leaving the country, even though you haven’t withdrawn the pension, the fact that you could potentially withdraw it means you are avoiding tax and so the deduction should be denied. That makes no sense to me. I can understand them doing that if and when the funds are withdrawn for non-retirement purposes.
Even if the taxpayer returns to switzerland, works again (transfers VB back to pillar 2) and works until retirement and collects and annuity, it still doesn’t matter.
3y is the minimum mandated by law (art. 79b LPP), while it’s likely it’s usually sufficient in practice, I don’t think it give safe harbor (e.g. not sure what happens if someone sends the tax office proof that you planned it from the start?)
iirc from the case that’s what she claimed for her defense, from the canton’s perspective if they let it go they likely have no way to prevent her from withdrawing.
Also the fact the canton loses the tax revenue likely doesn’t help, while it would be way too complex to implement it would be more fair to make the lump sum taxation be based on where the income tax was deducted, eg if your pension money has X% coming from Canton A and Y% from B, then it’s Canton A and B who get to tax it, prorated, regardless of the domicile of the foundation. This would avoid all the stupid geoarbitrage.
this is the crazy thing. i’ve had tax returns take years to process. in this case, she says she’s going to come back soon, so why not wait, see if she returns and all is ok, or if she pulls out the cash, raise the tax notice then.
it seems very strange. i wonder if there’s more to this case than meets the eye.
It’s explicitly mentioned in the court case, the fact she decided to come back cannot be used to changed the decision in the federal appeal (because those facts happened after the prior court decisions, see point 1.4 in 9C_349/2024)
I think you should realise that tax office is much sharper than most people think. With a large buy-in like this, there would definitely be a flag. So what they do with it is up to them.
Exactly. Because the tax deduction was annulled in arrears, the tax was due in their canton of residence at the time that the tax deduction was claimed.
The 3-year block is a general measure to reduce tax avoidance. But each tax office has the authority to judge withdrawals on a case-by-case basis. It can be assumed the tax office has a vested interest in not granting tax deductions, if they can find a reasonable excuse for it.
My hunch is that the poorer a municipality/canton is, the less lenient they will be. That’s been my personal experience with regards to claiming tax deductions.
If I understand this correctly, with a marginal tax rate of 42%, you have a crazy high annual income. Congratulations on that! That’s why I’m surprised that this hasn’t been mentioned yet: Wouldn’t it make sense to consult an independent financial planner and/or tax advisor? You don’t have to do what a financial planner or tax advisor suggests, but your then have an opinion from someone who does this professionally (and hopefully knows what he’s talking about).
Another idea: Perhaps you could talk to your employer about paying out 50% of the 2025 bonus in December 2025 and 50% in January 2026? That way, you would spread your extra income over two years. But yes, I am aware that this is often not possible because it comes from a budget that is available this year and not next year, etc. But it would be worth a try.
Of course, that doesn’t make much sense if you’re expecting another extra bonus next year.
That is clear. My point was why rush to deny the deduction instead of waiting until the facts became clear.
The 3 year rule is not a safeharbour. It basically means that they can check for tax evasion in all cases, but if withdrawal within the 3 year limit, then the deduction is automatically denied.
il suffisait en effet à l’intéressée d’annoncer son départ définitif aux autorités compétentes et de manifester sa volonté de mettre un terme à son permis C pour obtenir un paiement en espèces de ses avoirs de prévoyance
Anyway, it’s not black&white, they took a bunch of different elements into account, and found that overall it leaned towards tax evasion. (By curiosity I read a bunch of other cases, and for fairly similar cases they can end up on one side or the other, there’s a lot of cases for people after divorce/close to retirement which involve buy-in)
That argument makes no sense to me. It’s like saying “To rob a bank, the plaintiff just needs to go into a bank and wave a kitchen knife around and we confirmed he owns several in his kitchen. Therefore, we’re sentencing him for armed robbery.”
I also spent a lot of time reading the various cases and have a better feel for what the tax authorities look at. But I feel that this particular case could have gone the other way. It seems that there is discrimination against those leaving Switzerland, which IMO has no bearing on building a pension as you can leave your pension pot to grow in a VB account after you have left the country.
Anyway. I think it is an area which needs a bit of care.
Stand-alone, neither should be an issue. I mean, these are pretty much standard transactions in the spirit of the law. Tax savings and buying self-owned property with it are a feature by design, after all.
For 3a, I double-checked with my tax office when I paid in and withdraw the same year.
The cases that end up in court are a combination of several things. Technically within the law, but you’d frown upon the idea when you have your common-sense hat on.
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