Eligibility of 3rd pillar tax claim & tax questions

Banks, Insurances & Third Pillar
1

Sorry if these questions seem too noob or even stupid as I’m still trying to understand how things are working here and am not very good with taxes, finances & etc.

Question 1. Is it true that you can claim tax refund on 3rd pillar deposits only when one of the following applies (or a more correct question would be - is it true that one only fills taxes when one of the following applies):
a. earns over 120k
b. c-permit holder
c. is a home owner

If none of these applies to someone - is there a point then to look into 3rd pillar since not being able to claim the taxes on these deposits kinda loses the point of making those payments for me.

Question 2. Normally, with years the salary goes up and so does the tax rate, right? So, saving (returning) on 3rd pillar taxes, say, 10% now - wouldn’t one be paying more in the future for that same money when withdrawing when their tax rate is, say, 15%?

I.e. if we ignore the returns (and simplify things a bit), one deposits 6’000 CHF yearly for 10 years: 10 * 6’000 = 60’000 CHF
With 10% tax rate they are able to claim 6’000 CHF back during those 10 years (10 years * 600).

When they withdraw the money (be it leaving Switzerland permanently or payment on a house) they might have to pay a 15% tax rate (since their salary grew and so did their tax rate), so while they saved 6’000 CHF on tax claims - they then have to pay 9’000 CHF (60’000 * 15%) i.e. didn’t one just lose 3’000 CHF?

I suppose some 3rd pillar withdrawals are not taxable though (home payment), is that the case? If so - which withdrawals are taxables and which are not?

Thank you!

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2

I don’t think you’re taxed with income tax, there’s a special table for withdrawing from your pension.

Btw “i.e.” = “that is”, I guess you meant “e.g.” :stuck_out_tongue:

https://www.123-pensionierung.ch/de/rente-oder-kapital/kapitalauszahlungssteuern/

3

All 3rd Pillar withdrawals are taxed at a reduced rate. The calculation you made above is incorrect. Check your cantons website for the 3a withdrawal tax rate, it is much lower than the income tax rate.

However the basic premise is correct, you save more with 3a the more you earn.

4

For Question 1 that is not true. Most cantons have a simplified tax form that anybody can file to get back some taxes for 3rd pillar contributions.

3 Likes
5

No. But if you earn that low it makes little sense anyway unless maybe in french speaking parts with their sky high taxes

One gotcha is very tight deadlines in some cantons, like end of March in ZH to file it or forget about any refunds.

Withdrawal taxes depend solely on amount being withdrawn and your future residence, not your salary

2 Likes
6

You are right about this. In Vaud with a starting average salary of 86K, you pay 14.48% at source. If you put 6800 in your third pillar you will get something like this.
86K * 14.48% = 12452 in Tax
79.2K * 13.84% = 10960 in Tax
Tax savings = 1492
Additionally, with the simplified tax form in Vaud, you can adjust the deduction for transport depending on how far you live from your workplace. By default it’s 700 CHF that is already calculated within the tax brackets, but if you live let’s say 5km from your workplace you can claim 1669 CHF for transport so an additional 900CHF and you save even more on taxes

7

Thanks everyone!

So, to summarize:

  • anyone can fill taxes, and most cantons provide a simplified tax form but with very tight deadlines
  • 3rd pillar withdrawing is taxed differently than salary (likely at a reduced rate)
  • the rate depends more on the amount withdrawn and residency at the time

BTW, am I reading the below image correctly - no matter what the amount you are withdrawing - there will be a fixed sum you have to pay for it? If that’s the case - it doesn’t seem like a very good deal, at least in my canton, unless there’s over 250’000 CHF to withdraw which with my uncertainty whether I will stay here after 5-10 years sounds like 3rd pillar is a no deal for me :frowning:

612_Kapitalauszahlungssteuern%20nach%20Kantonshauptorten.gif425×543 32.9 KB

Interesting information on different deductions depending on how far you travel to work though, wonder if my canton does anything similar as I’m currently commuting to a neighboring canton about ~90km daily.

Also, I guess I’m still wondering whether there are cases when you don’t have pay any tax on 3rd pillar withdrawals at all, like a home purchase, or is there always a tax, just might be different from case to case?

8

No, this table shows sample values.

9

Also, I guess I’m still wondering whether there are cases when you don’t have pay any tax on 3rd pillar withdrawals at all, like a home purchase, or is there always a tax, just might be different from case to case?

no the reason for withdrawal is irrelevant. The tax is called “Kapitalauszahlungssteuer” which literally means capital withdrawl tax.

10

So here is an example. You save 3a over 10 years on a effective tax rate of 17%, for simplicity 65000chf that would be 11050chf in tax savings. You cash that out in Risch, ZG for buying a house (or any other reason), that would be 923chf. Net tax savings = 10127chf

1 Like
11

“cash it out in Zug” meaning he would be domiciled in Zug, right? And you have to be domiciled there since a while (I don’t remember how many years) for this trick to work. Should the realty be located in the same canton or is this irrelevant?

12

Yes you would have to effectively move there for it to be credible. I dont think there is much in terms of time restrictions, however you cant just for example rent a 1 room flat and keep a large one in another canton.