3a pillar taxes at the end of the contract

Taxes
#1

Hello Mustachians,

The only reason I want to open a Viac account (or maybe Frankly) is that I want to maximize the money I have and to invest it the better way.
I only invested my money on VT with IB for the moment.

On paper, 3a pillar sounds like a great option because you deduct a great amount of your income taxes every year. But I guess at the end of the 3a pillar contract, you must give these taxes back, and I suppose it is not the amount that you have transfered on your 3a pillar that count but the total value on it.
So I was wondering if it was really interesting in the end?

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#2

You only pay up to ~9% tax when you take the money back. If you put the maximum amount every year, you may want to open 5 3a accounts and withdraw one of them every year so you end up paying maybe ~3% of tax.

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#3

@Mr.B If you are looking to invest your money, maybe check the new 3a solution from finpension out.
They have the lowest fees right now.

As @REandSTOCK already suggested, the best way to liquidate your portfolios and save tax money is to open multiple 3a porfolios and liquidate one by one each year. As far as I know is 50’000 per porfolio the current state of the art. But not 100% sure.

#4

Hi @Samse, when you are mentioning “liquidate” one by one each year, are you referring to the retirement age of 65 years?

I was reading as well about the 50k but my doubt is one: is it about the sum of the yearly contributions that should be less than 50k in one portfolio or should we consider the capital gain as well?

#5

Total amount, not just the contributions.

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#6

Yes im referring to the retirement age of 65 and as @dbu already mentioned. It ist the total amount, not just contributions.

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#7

thank you, I already made a “mistake” I have a total of 3 pillars in one portfolio
 anyway
 thank you :slight_smile:

#8

So conclusion is to open several portfolios with VIAC and try to avoid to accumulate more than 50k chf in each of them?

#9

I add money to the portfolio with the lowest balance.

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#10

Thank you all for your answers.
Correct me if I am wrong, what I should do is open a Viac portfolio and then I can open 4 other portfolios on Viac and I should try to balance them.

But that solution works only if I retire 5 years before 65?

I have the impression that this is very important to avoid lots of taxes. I don’t understand why this information is not more shared or even on the post of the blog.

#11

It doesn’t matter when you retire. You can start withdrawing 3a accounts the day you turn 60.

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#12

Hi @Cortana Cortana, do you know which is the max 3a accounts that we can have? is it unlimited or is it 5?

#13

Depends on the canton you live in.

#14

thank you @TrickMcDave, I did not know it was canton specific. Do you know by chance for ZH canton?

#15

Zurich Cantonal Tax Authority doesn‘t put a cap on those accounts. Source (unfortunately in german): https://www.zh.ch/de/steuern-finanzen/steuern/steuern-natuerliche-personen/steuerwissen-natuerliche-personen.html

Whether it actually makes sense to have more than five depends mainly on your personal situation.

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#16

Guess there is some misunderstanding here. By law, all cash withdrawals (2nd Pillar and 3a) are taxable and the tax is in most cantons progressive - the more withdrawals the higher the tax.

Tax authorities generally accept withdrawals over multiple years to be individual and they generally allow you to stretch over multiple years and to optimize the tax situation. But as per the law, you are technically not allowed to optimize taxes this way. So its all a matter of what the Tax offices (at their discretion) let slip and when they call it tax evasion.

No-one knows how this will evolve over the next years. Given there is no legal entitlement, authorities might just at any time close the loophole.

In this spirit, would go for up to 5 accounts but would neither plan in that this actually worked out nor put too much focus nor expectation into this.

Kind regards

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#17

Interesting is that Schwyz does not have the lowest rates in most cases.

If I look at https://finpension.ch/de/vergleich-kapitalbezugssteuer/ even cantons that are generally high tax like Geneva, Solothurn or Schaffhausen have lower taxes than Schwyz for third pillar for bigger accounts. It‘s amazing that an industry has been created to profit from expats with those Schwyz based firms that require hundreds to pay you your money when leaving Switzerland, you can save a lot of money with just a little preparation by opening accounts early at the Kantonalbank at your target canton.

Question is, what happens if you leave Switzerland and cash out accounts in multiple cantons in the same year? Since the taxation is per canton, if you have 50000 in Schwyz, Zug, Schaffhausen, Appenzell and Geneva, you pay an average of 2,2%, while for 250000 the minimum is 4,8%. Would that work and be legal? In fact if the taxes are independent you can optimize even further, some cantons have less than 1% tax for smallish amounts of 5–10000.

#18

My Pillar 3a withdrawal was reported to the tax authorities of my home canton and then added on top of the total income numbers for stuff like military service avoidance fees (Wehrpflichtersatz). Iiuc withdrawing at low cost comes with „relocating“ to Schwyz shortly before leaving the country.

#19

Realistically, you are not going to be personally resident in five cantons within the same year - or any other “short” period of time.

Relocating (yourself) to Schwyz doesn’t attractive when Schwyz isn’t a particularly tax-favourable town or canton to withdraw amounts of 250k or above - as indicated by the comparison at finpension above. At 500k, Schwyz even seems to be one of the more “expensive” municipalities and/or cantons in Switzerland. This might seem a lot for pillar 3a only, but many would probably want to withdraw your pension fund as well.

If anything, you might benefit from low “taxation at source” rates if you withdraw funds from an institution in Schwyz in leaving the country.

As I understand it, you have to distinguish between:

  • being taxed on capital withdrawal as a Swiss resident, for which Schwyz does not seem particularly tax-favourable (for larger amounts) a residency
  • being taxed on capital withdrawal as a non-resident, in which Schwyz seems to apply rather low taxation at source rates for benefits institutions domiciled in Schwyz
#20

And for that case, worth mentioning that you may have to declare those to your new tax residence (and when that happen, you may recover the swiss withholding depending on the treaty).

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