Investing in 3a when only recently moving to Switzerland

Hi everyone!

I came to this beautiful country on September and started to work.

I opened an account with VIAC and already invested some money (3.8k). Since I will work only for 4 months with around 35k of earned income for the year of 2020, does it make sense to contribute any more to the 3a? or am I better off just investing in IB from now on?

Thank you!

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Make sure to declare your 3a contributions at the beginning of each year, so you’ll get a tax refund on the already paid income taxes. You can find the forms on the webpage of your local tax office.

Welcome!

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Thank you very much Cortana.
Do you know roughly when tax declaration/tax forms are usually submitted?

I would personally do it in the first 3 months.

In which canton are you living?
What’s your tax rate at source?

I currently living in Schaffhausen.
First month it was 17.3% (because of relocation package) and then second month (and moving forward) will be 12.84%.

-> Quellensteuer-Tarifkorrektur (2nd last row) -> Beiträge an anerkannte Formen der gebundenen Selbstvorsorge CHF (Säule 3a) on the 2nd page

I don’t know if they provide a version in a different language.

So you’ll save ~13% in taxes. So if you pay the maximum (6’826 CHF), you’ll probably get a refund of around 900 CHF. If you earn more in the future, you’ll get a higher tax rate and thus also save more taxes by paying into your 3rd pillar.

Btw, in the first year I expect it to be prorated like other deductions.

Does somebody have a reference to confirm that it’s prorated?
My wife moved to Switzerland in October and I don’t know if it makes sense to open a 3a account for her this year.

Not sure about references, but that was my personal experience for the other standard deduction (the tax software didn’t prorate, but they fixed it when processing).

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I’m not sure, but isn’t his tax rate at source already prorated? So it will be closer to 20-25% next year?

Tax at source isn’t prorated, it’s based on each month’s income (at least was the case for me).

(13% sounded low to me, but looking at the tables sounds correct: https://sh.ch/CMS/Webseite/Kanton-Schaffhausen/Beh-rde/Verwaltung/Finanzdepartement/Steuerverwaltung/Formulare/Quellensteuer/Quellensteuertarife-2290635-DE.html)

Yeah when I was working in Basel, I used to see 18-33% with my clients. 13% sounds so low!

Careful. As others said, you can only contribute 4/12 of the limit this year, which is about 2.75k… Taxes and social contributions are pro-rated, as are all deductions.

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Talking exclusevely about Quellensteuer or normal taxes ?

Big difference is that Quellensteuer applies on the Bruttoeinkommen before social payments, whereas for the regular taxes after social payments, therefore the difference on the tax rates.

3A contributions are not pro-rated. Here, the tax treatment differs from the social contributions and professional expenses which are pro-rated.

You can max out your pillar3 contribution from your date of arrival in Switzerland.

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You can, but will you get the full (not pro-rated) tax break for that amount?

That’s my question :slightly_smiling_face:

Even if it’s not the full amount amount of tax break I wouldn’t be too unhappy since the TER isn’t that awful when compared to similar options and most of my investments are in VT anyway

Yes you will.

The ax authorities will consider the amount you paid for 1) the period of residence in Switzerland and 2) for the determination of the annual income and related deduction (tax rate determination).

Example1

  1. Salary from June to December 60 CHFK and 5 CHKF paid in the pillar A

60’000 120’000
-5’000 -5’000

55’000 at the rate of 115’000

  1. Salary from June to December 60 CHFK and 6.8 CHKF paid in the pillar A

60’000 120’000
-6’800 -6’800

53’200 at the rate of 113’200

The above applies for someone filling a tax return in Switzerland or asking for the benefit of the 3A when taxed at source until 31.12.2020.

From 01.01.2021, the law will change for people tax at source. A tax return will be needed to request the 3A deduction (same will apply for repurchase in the pillar 2).

Source - https://www.bdo.ch/fr-ch/publications/articles/nl/revision-de-l-imposition-a-la-source-2021

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As far as I know if you has only work 33% of the year you can only deduct 33% of the max amount of the pillar 3.

Couple of years happen to my wife, she was 2 months unpaid leave and she was able only to deduct 5XXX and not the full amount.

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