I read that as well.
This is just straight up tax fraud.
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Also don’t they need to repay the loan at some point? 
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Hah yeah I read that too and thought to post it here for laughs. https://www.youtube.com/watch?v=UBCORUNqPu8
Not necessarily is it?
- Suppose the person is saving 100k per year, and only takes out 10k loan, 2P contributions are still funded by own savings in my view.
Just because someone has a loan it does not mean they cannot do buy backs. Otherwise anyone who has a mortgage would not be allowed to do it
- If the pension fund statement says the buy back capacity is 1M CHF, and the person has total 100k in Vested Benefit accounts, then no taxes have been dodged
The tax fraud part comes from ommitting the vested benefits amounts and overpaying the voluntary contributions.
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Example:
a) Maximum buy back capacity (show on the individual’s pension fund statement) = 1M
b) Amounts in vested benefit accounts not declared to the pension fund = 100k
If the individual makes a voluntary contribution of 10k there is no tax cheated because the buy back could have been made regardless whether the vested benefits were omitted or not. Therefore no tax fraud
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Let’s say “it depends”. However it doesn’t look like the OP from reddit has clarified own situation regarding this issue.
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On what - can you elaborate? To be clear I am not advocating to do it but so long as the buy in capacity will remain much greater than non declared vested benefits it seems crystal clear there is no tax fraud
Fraud towards other members of the pension fund and its administrators is another discussion
I also understood it that way. However, the poster on Reddit did not go into this part, although he explained everything else in detail. I would therefore assume that he is ignoring exactly that, which would then be tax fraud. But of course: we don’t know the exact situation. In any case, it’s dangerous to post something like that on Reddit without going into this ‘small’ detail (and what I also find interesting is that it deducts both the purchase AND the loan).
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Also weren’t there some court cases about people taking a loan (iirc from a family member) to do a buy in?
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Like you wrote - on the buying capacity, which wasn’t mentioned.
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The purchase amount would be deducted from the income.
The loan would be deducted from the taxable wealth.
The interest on the loan would be deducted from the income.
Maybe the loan is organized in such a way that it doesn’t look like its major purpose is to contribute to the second pillar - as a mortgage increase or margin loan at a broker or something else.
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Imagine a change in life situation / job market / salary and the OP ends up working for a much lower salary than the current one leading to much lower buy-in potential. At that moment, if the undeclared vested benefits are already higher than the max buy in, would that not lead to a legally tricky situation ?
To be fair: This can also happen without vested benefits accounts.
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That part should not be an issue as long as the prior buy-ins were within the legal limit at the time. No further buy-ins would be allowed, of course.
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There are two elements in this post on Reddit
A -: borrowing money to contribute in BVG
B -: not transferring VB funds to new employer
Regarding B -: I think the OP at Reddit didn’t actually say that they are over contributing to BVG by intentionally not declaration VB. The post was talking about not transferring VB which doesn’t automatically mean that they are over contributing to new BVG. This option of not transferring VB to new employer would be closed soon I believe
If they are over contributing to new BVG (by not reducing the potential purchase amount considering VB) then it would be a tax fraud.
Regarding A -: I don’t actually think that this it is any sort of fraud. How someone funds their contribution is not relevant for voluntary contributions. I am not aware of any rule that says that if someone wants to contribute to BVG voluntarily then they cannot have a personal loan. This does sounds like a loophole though.
Another point regarding A. It only works for first year if the intention is to not have more than 15K of rolling debt. The second year onwards, it makes no difference if you borrow more money from bank or take it from your savings account.
Exactly. This strategy is a distraction.
The real question here is should you borrow money to invest in BVG & take on interest rate risk. Period.
It is not a brilliant tax saving strategy which gives golden eggs every year.
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