3rd pillar but with exit door before retirement

Hi everyone,

My partner and I are both on a B permit. Our gross revenue is each 7500 and we pay around 1000 of revenue tax.

Looking at this I suppose that making my own declaration and declaring deductions (car, food, insurance and 3rd pillar) could allow us to reduce our impot a la source (straight tax ? The regular system when you are on a B permit)

The question is… we are not sure that we will remain until retirement in Switzerland. Maybe we will move from here in 6 months, a year ? 5 years ? Our plans are not certain.

Do you think in this situation is worth to invest in a 3a?
Can we withdraw the money from the 3a if we definitively leave the country ?

Thanks for your help and time !

Yes

You could just put money in a 3a savings account without investing it to still get the tax benefits, but you’re probably better off investing it yourself. If you want to invest the 3a money you should have a horizon of at least 5-10 years as with every investment in my opinion.

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The main thing is that we don’t know how the future will be for us.
In the case that we invest in a 3a but let’s say our future change: we are fired and forced to move to our own country for instance.

Can we after moving out of Switzerland keep this money in the 3a account and withdraw it after 5-10 years? So the investment is worth ?

In the case that we invest in a 3a and we withdraw 12 months later, do we pay penalties or do we just not earn money from our investment ?

I am trying to find the best config for our situation but it is a bit hard… we are 32 years old also…

FYI the tax at source also takes into account some standard deductions, and depending on your city can be more or less of an advantage (tax at source is based on cantonal avg rates, so living in higher than average cities will mean paying more when not at source).

But then also remember that filing obligations changed in the past few years, and just a rather small amount of wealth would force you to declare anyway (iirc 70k in Zürich for example)

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Is there any chance to make a simulation?

I live in VS, and I reckon my revenue is higher than average.

I work 35km from my home and the difference between going by car vs going by train is substantial (= 30min in car vs 1h17 in train, bus, train with 15min of walk)

Following this I could deduce 0.7(km) x 70 x 200 (I work in another office sometimes) = 9800.-

Eating 1x day out of my house could allow me to deduce 3000.-

Health insurance could allow me to deduce 3000.-

3rd pillar would deduce 6800.-

In total it is 22600 of deductions.

Is there any way to make a simulation ? TaxVS asks me for a login that I dont have as I am taxed straight at the source currently.

Thanks for your help

Hello,

I think you should be able to download the tax software of your canton (Geneva = GeTax, Vaud = Vd’Tax …) and make different tax files depending on the options.
You could then compare the tax level for each cases.

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Neither, there’s no penalty and you will earn (or lose depending how the investments perform) money. You pay tax on withdrawal of 3a funds, but this you need to pay anyway, no matter if you stay and withdraw at retirement or not.

I don’t think you can, or at least not for an extended period, but I’m not sure about that. Certain insurance linked 3a solutions offer this possibility, but you should absolutely NOT buy 3a solutions from an insurance.

Why wouldn’t you, you think providers won’t let you?

I read somewhere that banks won’t let you keep it for an extended period, but it might have been incorrect information, that’s why I said that I’m not sure.

I wont be surprise. The more money they get (AuM up), the more fees they receive.

They wont be interested in having a “dormant” 3A for the next 25+ years even if invested in funds.

For a quick and dirty calculation: TaxCalculator
For a test run on the whole declaration: VSTax - VSTax - vs.ch

You don’t need to fill the fields you don’t have information for (tax number and the likes) nor upload proof documents to fill a “test” declaration in VSTax. You also don’t have to fill a definitive/real declaration to use it. Just put your numbers in and run the calculation without sending it to the tax office.

I wouldn’t let my investing horizon affect my decision to use a 3a or not. If you have to withdraw your funds when they are down and take a loss, you can invest the withdrawn money in similar funds in taxable and buy them back at their discounted price, only reducing slightly your exposure to the relevant stocks/indexes.

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When I was taxed at source I would declare the 3 pillar and it did not necessarily entailed the full declaration (I did not take that path as it was more complicated and was unsure of getting any benifit). Basically it would just keep being on the B permit tiers of tax, and after deducting the 3rd pillar, I would be in a lower one and would get a refund.

I am based in Geneva, not sure if it has any impact.

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This has been updated from calendar year 2021, if I am not wrong.
Now if you want to claim the tax refund for 3a while on B and taxed at source, you are getting switched to the full tax filing process for the foreseeable future.

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Contributing to the pillar 3a will lower your tax liability in every case. For further tax deductions, you could consider voluntary contributions to the second pillar, if you are eligible.

To find out how much you could save, compare the income tax saving you get from the pillar 3a (accounting for tax brackets) and compare it to either:

  • The withholding tax on pillar 3a benefits in the canton where the retirement foundation is located, if your plan is to withdraw when leaving Switzerland.
  • The capital withdrawal tax in your canton of residence, if your plan is to withdraw while in Switzerland (including early withdrawals for a home).

The withholding or capital withdrawal tax only applies once when you withdraw. So the combined tax savings (tax reduction * number of years until withdrawal) minus the one-time withholding/capital withdrawal tax equals your tax savings.

Since 2021, B permit holders who pay withholding tax can no longer apply to have their withholding tax reviewed and adjusted to match deductions. Instead, you have the right to request an individual audit, and receive tax refunds if your effective taxes (accounting for deductions) are lower than the withholding tax.

That won’t always be the case, as there are situations in which witholding tax works out cheaper than effective taxes. You can calculate this yourself based on the withholding tax you pay, and the income tax rates in your municipality. It may be worth consulting a local tax advisor if you have difficult with the calculations or just don’t have the time.

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I’m from Portugal and this works for Portugal, you need to check it regarding your own home country.

I have even spoken to Finpension to validate this. Leaving Switzerland and going back to Portugal is one of the reasons that allows for the full withdrawal of the pillar 3a, at any time. That means that when I leave, I can either withdraw the funds immediately, in 5-10 years, or in retirement, so I can wait for the right moment. Plus, with Finpension, because you can invest in 5 different portfolios, you can also withdraw one portfolio at a time, which allows for even more flexibility.

I’m in the same situation as you, I’m counting on staying in Switzerland for ~5 years and I was in doubt if it was worth it to invest in a pillar 3a. Turns out, for me, it is.

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The question is: how are they supposed to get out of it?

They can only pay out the pillar 3a benefits if the customer provides the information and required documents to them. And even if they could cancel your contract, where could they transfer your funds to - there is, afaik, nowhere to transfer them to. And I doubt that pocketing them themselves is legal.

Thank you all for your answers support and help !!!

@portugalfire could you open a 3rd pillar and still be on direct tax at the source?

After calculations it seems that being taxed at the source as I am now is better than making a DIU…