I have a question, which might have been answered multiple times, but I would really appreciate a quick answer (if that’s the wrong thread, please tell me).
My situation: 26yo from Spain, 90K gross per year. I came 3 year ago, so I still have the B residence permit. I save around 30% of my net income, however, I am not very well educated financially, so I hold all cash in my bank account (but that’s another topic).
My question is: since I am planning to go back to Spain in few years (2-3), is it actually worth having 3a, or even second pilar, tax-wise? Of course, having in mind that I might be taxed once I go back.
Pity that you didn’t ask at the end of last year, you could have still made contributions for 2022.
I think the finpension FAQ covers most. Particular points to be aware of:
You should be able to get the tax upfront savings on income tax, if you are subject to (probably not automatically, due to lack of capital income and other income) or opt for ordinary tax assessment
I assume that in many countries your 3a account will count as a retirement account for tax purposes. Not in all, but likely in EEA countries like Spain, I assume (due to European coordination of social security systems). Which means you continue to benefit from tax deferral, preferential tax on foreign dividends and dividend compounding
You likely won’t be able to open new 3a accounts (most anyway) as a foreign resident
finpension does charge 250 CHF for a capital withdrawals of foreign residents.
You will likely pay local (e.g. Spanish) taxes depending on your current residence at time of withdrawal. Though you may be able to somewhat control that by withdrawing in a year where you don’t pay many taxes, e.g. “gap year”
In the end, I guess, it likely hinges on the tax treatment in your country. If it’s a non-taxable account in Spain and you don’t pay much in Spanish taxes upon withdrawal, it would probably be a good idea (you should be able to reclaim Swiss withholding tax due to current double taxation agreement, so don’t worry about that).
Then again, if you only begin pillar 3a now and move to Spain in 3 three years, that’s only a bit more than CHF 20’000 you can pay in. So less than a full year’s Spanish salary… may not be that bad in taxes, even at full rate.
PS: I realise you mentioned you’re not too well educated financially, and, well, I admit I didn’t phrase my two posts very beginner-friendly. So look around, maybe consult the other thread and ask if something’s not clear.
Since I also can’t comment on the Spanish tax situation for such an account (though a Spaniard having moved back to Spain may be able to?), this also merely serves as a starting point of things to look into, not a clear answer, I’m afraid.
Agreed. But if they did, there is a big chance they are not following this forum anymore. So I suggest OP to also contact by private message people who seem to have being in this situation, not just expect them to see your posts.
Based on the info I found and shared in this thread it is not a good idea to make voluntary contributions to 2 and 3 pillar when resident in Switzerland if your plan is to withdraw the money when resident in Spain.
Based on the info I could find online the withdrawal would be taxable in Spain as earned income. The tax rate depends on your total income and region. For example in Catalunya on income over Eur 175k the rate would be 48%. The more favourable savings income tax would not apply.
@Contemplation talked to a Spanish tax advisor and I believe the conclusion was similar (thread that Dr.Pi referenced above)
It could still make sense to contribute if you have another plan to unlock the money from the system. But probably not worth it for the tax differential on 3 x 7000 CHF
Just for the sake of completeness, the OP mentioned the 3a and the second pillar as well. Depending at what age the retirement credits start in his plan (usually 25, but sometimes earlier), there could be some more contribution possibilities there as well (in the form of buy-ins or purchases of missing years of service). Now, not making any suggestions on whether that would make sense or not tax-wise, just pointing it out
The external link you shared in that post seems to be down.
That said, as similar as they may be treated in Switzerland, one should not be too quick in lumping together 2nd and 3rd pillar and their tax treatments in other countries.
Pillar 2 is a pension fund scheme that allows for optional lump-sum payments at retirement.
Pillar 3a however doesn’t usually - and in finpension’s not at all, TMK - allow for pensions. They’re more a retirement savings scheme. And (at least) retirement savings do seem to enjoy preferential taxation rates in Spain…
I’m not a tax advisor either. But even as just an with a , if I may disagree on that…
“If the scheme is not defined as a pension scheme by Spain then the same applies but the problem is much less because retirement savings schemes enjoy a much better tax treatment in Spain.”
Given the examples mentioned in that article, pillar 3a with finpension would seem to qualify as such a retirement savings scheme to me. After all, you can’t get a pension, and it’s pretty similar to a self-select ISA.
And retirement savings schemes, according to that article, are taxed at capital gains tax rates …of only 19 to 26%. Which is not only no more than the marginal tax rate for someone like OP in, for example, Zurich.
Not only would she or he pay that same tax anyway, when alternatively investing the same amount into non-3a securities. Given that the tax break is upfront, the pillar 3a investment should be the better one (if the assumption regarding tax holds water and at current conditions and tax rates).
From a tax perspective, there is little value in using the Swiss pillar 3a if you will withdraw the assets as a tax resident of Spain. The income tax which you would save in Switzerland is lower than the income tax you will pay when withdrawing the money in Spain. Additionally, Spain has very low thresholds for its highest tax brackets, so even small withdrawals from the pillar 3a can impact your Spanish tax bill substantially. In almost every case, the figures would not add up. Withdrawing your Swiss vested benefits without losing a big chunk of them to Spanish taxes will be complicated enough.
I agree, it could be interesting for someone to research if there is a break for 3a like you outline.
I moved on from the topic because in our case we have a large % of our NW in 2nd pillar. If we move to Spain we would look at one of the solutions to withdraw both 2 and 3 pillar before becoming Spanish resident.
note: contributions made to a UK ISA are not deductible from income tax. I vaguely recall this might be relevant since savings in the UK ISA wrapper could be viewed more as already having been “taxed by the host country” in comparison to swiss 3 Pillar where income tax is not paid on the contributions
And it’s good to know how many tax I’m going to pay if come back in spain. And if I can obtain my 2 & 3 pilar.
I don’t now if it’s a good idea to quit switzerland and go to spain. Maybe go to another country with low tax and finally to spain?
I would like to discuss about this. Maybe I can do a telegram spaniard ? my telegram is @Oskirch