Hi all, I’ve been following FIRE related media for a few years, lazily and haphazardly following the mustachian approach. Very glad to find a Swiss-focused community. I’d like to now try and get everything in order much more as I plan for the future.
This is because this year my employer has been sold, triggering the sale of stock options I held. I expect my income this year to be around 900k CHF, pre-tax. I’m super fortunate to be in this position.
Of course, tax needs to be paid (in Geneva, marginal rate around 48%). I don’t think I have many options to reduce tax, but one suggestion is to repurchase as much of my 2nd pillar as possible. Given the high marginal rate, is this a no-brainer?
I’m 31, British but hoping to stay in Switzerland for the long term, here 4 years so far. Part of wanting to get my finances in order is that I might leave my job in the coming year, and consider pursuing something entrepreneurial instead.
As for my assets, I have about £140k in the UK, 250k CHF and 650k USD here in Switzerland spread across bank and brokerage accounts (the USD is from the options sale, all cash right now as I decide what to do with it, noting a large chunk needs to go to the tax office). Plus pensions that I need to sort out. Currently renting, but I might consider buying in the next 5 years (depends on how that entrepreneurial dream interacts with home ownership).
Does repurchasing as much as possible make sense right now? Is there anything else I should be doing before the year is out? And anything else I should consider going forward?
If you plan to buy a home in more than 3 years i would add as much as possible to your 2. pillar. This is of course personal but you can also donate to a charity as your impact is nearly doubled with a marginal tax rate of 48%. GiveWell recommends some charities that they evaluate based on their impact. After that I would max out 3a with VIAC and put the rest in VT after I set aside enough for taxes.
With the entrepreneur bit in mind - consider that if you become selbstständig in Switzerland you can cash out the 2nd pillar (with approx 5% Tax rate). Wait at least 3 years after buying in though, else they’ll income tax you on it after all.
FYI you’ll be limited to 20% of income (or even salary) per year until you’ve been more than 5 years in Switzerland.
Congratulations! Have you consider moving, even just for a few months, so as to reduce your tax liability?
According to comparis, what matters is where you live on the 31st of December. Given the amounts, it may be worth a tactical move.
You can’t live just a few months there, otherwise they will claim that you did it only for the tax benefits for the lumb sum and tax you at the higher rate
So my girlfriend actually lives in Lausanne, and Vaud appears to have a significantly lower tax rate than Geneva. We have also been talking about moving in together, and we thought next year might be the time to do it.
According to the Neuvoo tax calculator, I would be paying around 250k less tax if I lived in Vaud. That is hard to ignore. https://neuvoo.ch/tax-calculator/?iam=&uet_calculate=calculate&salary=900000&from=year®ion=Geneva&city=Genève
What are the exact rules here? Have I missed the boat? Can the fact I’d be moving with my girlfriend (of 18 months) add legitimacy to any claim I have that I’m not moving for tax purposes?
That will probably work. But you don’t have much time left. It is also important that you stay there for some time.
That’s no problem. Long term girlfriend. Plan was to move to her anyway (she’s just starting a new job in Bienne, so Lausanne is the middle ground between my job and hers, plus I might not stay in my job in Geneva much longer).
Does the fact I received the funds in September mean anything?
Oh god this is a huge amount of money. What the hell do I do now? Any pointers on where I can confirm it would work? (All due respect to you, and my eternal thanks, but I don’t want to make such decisions solely off the back of a forum post - I’d like more concrete verification).
Move now, tomorrow at the latest. 250k is worth to try it.
It won’t be 250k, the calculator has a bug
I agree its a bug, having looked further. Seems like the difference in my tax liability will be more like 6k, not 250k! Muggins here is feeling very silly right now. Lesson is, don’t believe everything you read on the internet
Given this more accurate reading, I’d rather take it easy and move when the time is right for us next year, not rushing things now.
This takes me back to my original point though, what can I be doing now? 2nd Pillar repurchase sounds like the only real option, but I can’t do much here as I’ve already bought back in the past (which wasn’t much to fill in given I arrived at 26 and think I only buy back to 25 or so?)
According to my other colleague (we are only two, working for the Swiss subsidiary of an American company, and he’s in a similar position to me with stock options), he has been discussing with our employer ways to increase the amount we can repurchase, apparently extending the years back to start from 17. He has also said we can buy back (or should it be buy forward) the years between 58 to 65 for an early retirement.
Do either of these things make sense? I can’t find any information about them, but I’m reaching out to my 2nd pillar provider for more information. I would have thought the rules about which years we are able to purchase are set in stone by the federal government, but I’m very lost to be honest.
I do like the charity idea. Is there any specific process needed or documentation required with regard to declaring this in my taxes?
Because it is a really big sum of money, it might be interesting to check something. When I remember you pay taxes, where ever you have been located on end of December. So just in theory, if you would change your place of living e.g. to a much lower taxed location this might be something. You would need to confirm this with your tax guy. But it might probably a tax “optimization” of > 100k.
Unless it’s the Red Cross or another giant, Just make sure it’s an official registered charity with the tax authorities in CH! Usually that will be on the website of a charity somewhere “registered” or “zewo-approved” etc. Once you think it says so on the charity website double-check with the tax authorities (cos can’t believe everything on the internet
For significant donations the charity will send a confirmation letter which u can attach to next year’s tax declaration.
I donate to the against malaria foundation and another charity via the givewell foundation. At the end of the year they. send out an email with a signed pdf that you can declare for your taxes. I usually add 200-300 chf on top as “small donations” without providing any proof. GiveWell doesn’t hassle you either and doesn’t beg for money.
Sorry, it is https://ea-stiftung.org/ for Switzerland.
When I donated (a large amount!) to the Against Malaria Foundation, the (Zurich) tax office did not recognise it. They only let you deduct money donated to Swiss charities.
I wouldn’t be so harsh. People do donate on the streets without getting receipts.
You can donate to the against malaria foundation over https://ea-stiftung.org/ and deduct it. I donated 6’000chf last year and they let it be deductable. Note that you can deduct a maximum of 20% of your income.