Limit buy in to 2nd Pillar for expats with less than 5 years into the fund?!

Taxes
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Dear experts and afficionados,

I have been reading about the 2nd pillar topic pp and down this forum, as well as blogs. What I had not read is that there is a limit to how much one can put into the second pillar for those non-Swiss that have not been contributing to a pension fund for at least 5 years. Well, the limit is on how much will count as non-taxable income, apparently one can buy back but it won’t count.
This is a pretty serious clause that, if correct, I would like it to be findable for search engines used by others as bad as me at finding this information.

Details: I lowered my guard on the topic as my wife is far past 5 years in the country and enjoying a permit C. Apparently, it does not matter how long one has been in the country, it is all about how long contributing to a 2nd pillar pension fund. So, as my wife started working, after a couple of years, I thought it would be wise to do buy back into her pension, and obviously the pension contact person forgot to mention this too: One can buy back but it will not discount from the taxable income. For the first 5 years contributing, the max is 20% of the AHV listed base income.

This is in Basel-Stadt but I imagine that this is not a cantonal rule.
Please beware. And update your blogs (@thepoorswiss and others) with this information please. Also, feel free to point to me how easy I could have found this information… and I missed it. I hope others are helped by this post. Also, this year, time to invest in tax accountants. Surely cheaper than missing something like this.

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That’s correct there’s a limit in the first 5 years after first joining a pension fund.

That said I’m not sure the money can stay in the fund, you should probably ask the fund to return it.

(Afaik it’s not that it’s not deductible, it’s that it’s not allowed)

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Legal basis

https://www.fedlex.admin.ch/eli/cc/1984/543_543_543/fr

Art. 60b

This limitation may be discussed on several expats website. It is probably written somewhere in your wife pension fund regulations

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And yes, this is about the buyin not being allowed, ask the pension fund to refund the part over the limit.

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This should be written in the rules of the pension fund and the pension fund often should remind you of this before you make any voluntary payments (assuming you talk to them first before making such payments).

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An additional aspect that’s easily overlooked (at least by myself) is around the 3-year rule. When you withdraw capital after making a voluntary contribution to the pension fund (e.g. by relocating to a different country), you have to wait for 3 years, otherwise you loose deductibility of your income tax. That I knew.

The same applies when you join a pension fund again: 3 years after a withdrawal, you may not deduct voluntary contributions from your income tax. Even when you are a Swiss national.

So, when playing this game, there is a 6-year cool-off phase.

edit: deleted, as this pertains to a very individual case.

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How does this work? Pay back the saved income tax retrospectively at the time of withdrawal? Counts as income in the year of withdrawal?

Does it concern voluntary pillar 2 contributions and all 3a contributions?

Is it allowed to leave pillar 2 or 3a in Switzerland and withdraw any time? Like could one withdraw 3 years later? I think I remember there’s a time limit? Could one leave it till pension age?

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I’m not sure if you mis-typed, you mention 3 year withdrawal rule twice and it wasn’t clear to me what you were trying to say or how you get 6 years from the 3 year period.

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Apologies to the confusion I created, please disregard my post.

There is a 3-year period where lump-sum withdrawals from pillar 2 are not allowed (SR 831.40 Art. 79b) and voluntary contributions are not tax-deductible.

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Fixed it, sorry for the confusion.

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Thank you for the confirmation and suggestions. I will update the thread if I manage to get the funds back.