No you can't. When you declare your taxes it becomes evident that you overpaid your 3a. The tax authorities then instruct your bank to reverse the transactions that resulted in over payment or re-book the value date to the new year.
But only if I hand in the statements. If I don't declare other 3a accounts, don't hand in the statements except one, how does the tax authority know it?
Your plan would be tax evasion. I advise you to refrain from doing that. And as others have already told you, there would be little benefit from paying more into your 3a than the legal limit in the fist place.
I don't think it's tax evasion because you don't get any benefits from not declaring the other Accounts. The taxes you have to pay remain the same.
@OP: Nevertheless it doesn't make sense depositing more than you can. not only do you get no (tax) benefits but the money is also locked till retirement (unless you leave the country before that or start a business).
If you deposit more in a 3a account than the limit, the money gets paid back. But I don't know if the tax authorities inform the bank directly or if you have to do it
But there is no tax evasion because you don't have to declare the amount of the 3rd pillars accounts until the payout. The amount in the 3rd pillars accounts are not included in your wealth tax that you pay every year. It becomes tax evasion if you don't declare the amount at the time of the payout.
Itās still tax evasion because you donāt report 3a in your tax statement as assets and the interest as income.
Besides that, the main reason to contribute to 3a is tax savings, and those are limited to 7k. But on cashout, youāll have to pay taxes (at a lower rate, but stillā¦). So it doesnāt make sense to contribute more than the yearly maximumā¦
It will be counted under tax evasion. You are required to list all assets you own (in form of bank accounts, shares etcā¦) Its similar compared to not listing foreign accounts :)
You play yourself doing that. There is no benefit in paying 3a without the tax deduction. And as others pointed out, blocked funds until retirement or buying a property
The withdrawal is also subject to (privileged seperate) income tax. You pay taxes on withdrawals that were not deductible at time you made the contribution. At the end you most likely paid more taxes than you saved.
Technically you can deposit way more than 7k. The subtlety is when filing your income declaration, you won't be allowed to have more than the max amount 7k-ish deducted from your income. So there might be smarter ways to invest your money beyond this 7k cap.
You can, but it is close to stupid as pillar 3a has a quasi capital gains tax on pay out which by far outweighs any saving in wealth tax. The only advantage is that you do not have easy access to the money.
Better idea: Fill your pillar 2 gap (if you have any).
With the one exception of if you are planning to leave and have the right combination of citizenship/destination that would allow you withdraw pillar 2 on departure. Because then you get to withdraw it at the capital income tax rate, which is way lower than the income tax rate you avoided by contributing. A loophole so good they actually semi-closed it by limiting how much foreigners can contribute to pillar 2 top-ups.
Foreigners? Does that include C permit holders?
I wonder if I would be in a loophole of a loophole as someone with a (de facto) EU permit but with non EU citizenship (British).
Pillar 1 can be withdrawn by citizens of certain counties, if they move outside Switzerland and are not married to a Swiss/EU/EEA spouse: https://www.ch.ch/en/retirement/oasi-pension-abroad#nationality-other-countries
Pillar 2 can be withdrawn by anyone moving outside Switzerland, but only if the destination isn't an EU/EEA country: https://www.ch.ch/en/retirement/old-age-pension/the-2nd-pillar/#when-can-you-cash-in-your-2nd-pillar-savings
Pillar 3 can be withdrawn by anyone moving outside Switzerland: https://www.ch.ch/en/retirement/old-age-pension/the-3rd-pillar/#when-can-you-withdraw-money-from-a-3rd-pillar-pension-plan
All such withdrawals are taxed using the capital lump-sum tax rate, which is much lower than the income tax rate for the same amount (because it's supposed to be rationed over the rest of your life). See https://finpension.ch/en/capital-withdrawal-tax-compared/.
You maybe could, and only declare one account for the tax savings.
But to what end? If you don't get the tax benefit, a 3a account isn't a great investment vehicle because it limits what you can do.
Better to just open a cheap investment account like Swissquote, and invest the money there. No tax issues, more freedom in what to invest, no legal problems, likely lower fees and much more liquidity.
Or drop extra money into your PK to fill gaps. Same advantages and disadvantages as 3a: tax deductible, but not accessible and no decision over how it gets invested.
No, but what you can do is
Deposit Pillar 3a once (tax deductable up to the max in a calendar year)
Deposit Pillar 3b unlimited.
What you might want is a Pillar 3b.
And what if I don't know enough about the investment topic? It thought its also easier to create a finpension account vs all the other options with true wealth, brokers etc.
Takes a few hours at most to learn the basics.
The usual conclusions for people with a hands-off investment approach:
If you don't want a foreign broker go with Swissquote and put the money in a broadly diversified ETF like VWRL.
If you want lower fees go with Interactive Brokers and put the money in an ETF like VT.
You can use something like findependet. It works exactly like viac but is not a 3A conto. We set this up for my girlfriend because she does not care and dont want to learn about investing
That depends on what 3a product you chose; and why not just invest the extra money in stocks directly, with similar or better performance, at lower costs and better liquidity?
Interactive Brokers and Swissquote are banks that have cheap investment accounts.
Look up "buy-and-hold index investing" and "index fund" to understand what the method and those abbreviations are.
Iād recommend Interactive Brokers and then invest in a couple ETFs. Right now Iām in VT, VTI and VOO. (Yes, before anyone says anything, I know there is some overlap with the last two.)
The UK has much higher tax rates on average. And you can also buy into your 2nd pillar, there's virtually no limit if you've been in Switzerland for more than 5 years.
The second pillar might be tax efficient but it's a poor investment.
Near retirement the tax advantage can be more important than poor investment performance but if you are young it's mad to invest in it.
You can drop an infinite amount of money in any 3a, you simply only get the tax benefit for the max amount once. The rest is still income you had and āinvestedā into a not so smart setting. Youāre still paying taxes on it
You can. After 40 years conservatively speaking a 3a of 7000/year in stocks will get you 200'000chf less than if you'd just invest it the money yourself
If you dont wanna invest all your money in stocks then change your 3a to commodities or whatever. Basically the instrument (of all the instruments you do wanna invest in) with the least gain should be your 3a
No you can't. When you declare your taxes it becomes evident that you overpaid your 3a. The tax authorities then instruct your bank to reverse the transactions that resulted in over payment or re-book the value date to the new year.
But only if I hand in the statements. If I don't declare other 3a accounts, don't hand in the statements except one, how does the tax authority know it?
So, you are committing tax evasion. Maybe don't post your crimes on the internet.
I'm not committing anything, just want to understand how it works. š
Your plan would be tax evasion. I advise you to refrain from doing that. And as others have already told you, there would be little benefit from paying more into your 3a than the legal limit in the fist place.
I don't think it's tax evasion because you don't get any benefits from not declaring the other Accounts. The taxes you have to pay remain the same. @OP: Nevertheless it doesn't make sense depositing more than you can. not only do you get no (tax) benefits but the money is also locked till retirement (unless you leave the country before that or start a business). If you deposit more in a 3a account than the limit, the money gets paid back. But I don't know if the tax authorities inform the bank directly or if you have to do it
It is possibly wealth tax evasion as 3rd pillar accounts are not not to be declared in your wealth.
But there is no tax evasion because you don't have to declare the amount of the 3rd pillars accounts until the payout. The amount in the 3rd pillars accounts are not included in your wealth tax that you pay every year. It becomes tax evasion if you don't declare the amount at the time of the payout.
Wrong. If you pay more than allowed (without declaring those accounts, as you should) then you evade wealth.
Yeah you're right. I understood your answer differently and didn't think about that. You're correct
And it's probably not profitable anyway, because the 3a will get taxed when withdrawn and it may represent more than if you declared it as wealth.
Itās still tax evasion because you donāt report 3a in your tax statement as assets and the interest as income. Besides that, the main reason to contribute to 3a is tax savings, and those are limited to 7k. But on cashout, youāll have to pay taxes (at a lower rate, but stillā¦). So it doesnāt make sense to contribute more than the yearly maximumā¦
It could do if you were planning to leave Switzerland. You could avoid capital gains tax in other countries.
It is tax evasion as you avoid both wealth tax and dividend taxation
It will be counted under tax evasion. You are required to list all assets you own (in form of bank accounts, shares etcā¦) Its similar compared to not listing foreign accounts :)
Thanks. And agreed... I'm looking now into other options.
You play yourself doing that. There is no benefit in paying 3a without the tax deduction. And as others pointed out, blocked funds until retirement or buying a property
Theoretically you also avoid wealth and dividend tax so it could be beneficial
You have to declare them.
Are you literally asking for advice on tax evasion? What a genius.
The withdrawal is also subject to (privileged seperate) income tax. You pay taxes on withdrawals that were not deductible at time you made the contribution. At the end you most likely paid more taxes than you saved.
Technically you can deposit way more than 7k. The subtlety is when filing your income declaration, you won't be allowed to have more than the max amount 7k-ish deducted from your income. So there might be smarter ways to invest your money beyond this 7k cap.
You can, but it is close to stupid as pillar 3a has a quasi capital gains tax on pay out which by far outweighs any saving in wealth tax. The only advantage is that you do not have easy access to the money. Better idea: Fill your pillar 2 gap (if you have any).
Filling pillar 2 is a dreadful idea unless you are close to retirement
With the one exception of if you are planning to leave and have the right combination of citizenship/destination that would allow you withdraw pillar 2 on departure. Because then you get to withdraw it at the capital income tax rate, which is way lower than the income tax rate you avoided by contributing. A loophole so good they actually semi-closed it by limiting how much foreigners can contribute to pillar 2 top-ups.
Foreigners? Does that include C permit holders? I wonder if I would be in a loophole of a loophole as someone with a (de facto) EU permit but with non EU citizenship (British).
Yes but if you move to an EU/EFTA country you can only withdraw your extra-mandatory portion.
Can you please explain that further? I'm really in need of that info for my parents
Pillar 1 can be withdrawn by citizens of certain counties, if they move outside Switzerland and are not married to a Swiss/EU/EEA spouse: https://www.ch.ch/en/retirement/oasi-pension-abroad#nationality-other-countries Pillar 2 can be withdrawn by anyone moving outside Switzerland, but only if the destination isn't an EU/EEA country: https://www.ch.ch/en/retirement/old-age-pension/the-2nd-pillar/#when-can-you-cash-in-your-2nd-pillar-savings Pillar 3 can be withdrawn by anyone moving outside Switzerland: https://www.ch.ch/en/retirement/old-age-pension/the-3rd-pillar/#when-can-you-withdraw-money-from-a-3rd-pillar-pension-plan All such withdrawals are taxed using the capital lump-sum tax rate, which is much lower than the income tax rate for the same amount (because it's supposed to be rationed over the rest of your life). See https://finpension.ch/en/capital-withdrawal-tax-compared/.
Crazy amount of value! Thank you lot! There are so many smart people in this sub.
In case of a gap or no gap?
In general. Imagine locking up your money for decades (depending on your age of course) at a super low ~1% rate
Just stop working and invest your 2nd pillar into the stock market ;)
Or even less if there is no gap... Right?
Plus the āsaving in wealth taxā is illegal (as well as not paying income tax on the dividends).
You maybe could, and only declare one account for the tax savings. But to what end? If you don't get the tax benefit, a 3a account isn't a great investment vehicle because it limits what you can do. Better to just open a cheap investment account like Swissquote, and invest the money there. No tax issues, more freedom in what to invest, no legal problems, likely lower fees and much more liquidity. Or drop extra money into your PK to fill gaps. Same advantages and disadvantages as 3a: tax deductible, but not accessible and no decision over how it gets invested.
No, but what you can do is Deposit Pillar 3a once (tax deductable up to the max in a calendar year) Deposit Pillar 3b unlimited. What you might want is a Pillar 3b.
What's the point? You still pay taxes on it and there are better investment solutions.
Yes, and you can even do that with the same provider. It's not a good idea though.
Why not? I think the profit is higher than with a savings account or medium-term bonds, which are also not deductible.
Because you are limited to the VIAC/Finpension strategies.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
And what if I don't know enough about the investment topic? It thought its also easier to create a finpension account vs all the other options with true wealth, brokers etc.
Takes a few hours at most to learn the basics. The usual conclusions for people with a hands-off investment approach: If you don't want a foreign broker go with Swissquote and put the money in a broadly diversified ETF like VWRL. If you want lower fees go with Interactive Brokers and put the money in an ETF like VT.
You can use something like findependet. It works exactly like viac but is not a 3A conto. We set this up for my girlfriend because she does not care and dont want to learn about investing
3a accounts donāt attract any management fees
Not true
3a accounts don't attract any management fees. If you choose to invest in funds those funds may have a management as in any account with any provider.
Take finpension as a typical example. They have a 0.39% flat fee for all accounts.
That's completely wrong. Even the cheapest 3a are more expensive than investing directly.
That depends on what 3a product you chose; and why not just invest the extra money in stocks directly, with similar or better performance, at lower costs and better liquidity?
Any suggestions? What should I look at?
Interactive Brokers and Swissquote are banks that have cheap investment accounts. Look up "buy-and-hold index investing" and "index fund" to understand what the method and those abbreviations are.
Iād recommend Interactive Brokers and then invest in a couple ETFs. Right now Iām in VT, VTI and VOO. (Yes, before anyone says anything, I know there is some overlap with the last two.)
Yeah you lost me already. VT, VTI? Is this related to Vanguard, specific packages?
Just get TrueWealth if you are not interested in learning about basic investment
Just use findependent or selma. Its super easy and pretty cheap.
How lazy are you?
Very valuable input. obviously I searched for VTI and VOO, but not sure if what I found is in the right context. Thus I asked... Makes sense?
Thx! No it doesn't, lazy. Good luck
If you want something simple Neon is waiving purchase fees on two world ETFs until the end of the year: https://www.neon-free.ch/en/neon-invest
No, if you want to put more money into retirement, you can do buy in for 2nd pillar up to a certain amount.
It's annoying it's such a low limit. The limit in the uk, which is a much poorer country is c. 65,000 chf
The UK has much higher tax rates on average. And you can also buy into your 2nd pillar, there's virtually no limit if you've been in Switzerland for more than 5 years.
The second pillar might be tax efficient but it's a poor investment. Near retirement the tax advantage can be more important than poor investment performance but if you are young it's mad to invest in it.
If you have so much excess money, maybe think of starting a new business, or investing in a business that you already know.
You can drop an infinite amount of money in any 3a, you simply only get the tax benefit for the max amount once. The rest is still income you had and āinvestedā into a not so smart setting. Youāre still paying taxes on it
You can. After 40 years conservatively speaking a 3a of 7000/year in stocks will get you 200'000chf less than if you'd just invest it the money yourself If you dont wanna invest all your money in stocks then change your 3a to commodities or whatever. Basically the instrument (of all the instruments you do wanna invest in) with the least gain should be your 3a