3a without tax benefits

[travisqtc]

Hello,

I'm a newbie here in Switzerland and I think I already made a mistake.

I'm on a B permit and after calculating my tax (Zürich), I'm saving 4000 on taxes by remaining on B permit and not declaring my 3a holdings.

Unfortunately, I invested 7k last year into it, so I don't have access to it anymore. It is sitting in finpension, 99% stocks.

Based on all of these things, is it worth investing in 3a even though I cannot take advantage of the tax deductions for the next 5 years (that is when I probably move out of Zürich or apply for a C permit), or should I invest using IBKR until I reach 80K and then start investing into 3a when I'm on a C permit?

If I understood correctly I don't have to pay taxes on my capital gains up until 80k combined assets (cash + stocks), or am I wrong?

What would be the best strategy for someone who cannot deduct 3a from taxes and might leave Switzerland in the next 15 years?

Any help is much appreciated, thanks.

Conclusion:

It is not a good idea to use 3a without tax advantage due to the 0.39% vs 0.07% fee. The withholding tax of 15% (dividends) is negligible compared to the fees.

I called up finpension and they confirmed that it is not possible for me to take the money out.

After going through all of the cases, the most likely case scenario would be to buy a property in Switzerland or leave the country. If I want to stay in the country, I can only take it out when I retire, or 5 years before retirement. Otherwise I would need to open up a business, this business should be the main source of income, then I can also transfer the money out.

A loophole would be resigning at the current job, opening up a business, transfering the money out, then transferring from business account to personal account and then closing down the business, then finding a new job. Too much hustle for 7k in my opinion, so it is better to leave it there and forget about it until retirement, then transfer out the money. After paying taxes on it, I could invest it back into VT and surprise my kids/wife with it when I die.

Thank you everybody for your answers, much appreciated

 

[smta276603]

@travisqtc There is no capital gain tax in Switzerland, full stop.

Investing in a pension instrument (pillar 2 and pillar 3) means that you will pay taxes on their distributions, even if it's capital gain. For that reason those distributions are taxed at a lower rate.

This means that there is no reason to invest in these instruments unless you can deduct the investment from your current income taxes.

 

[travisqtc]

@smta276603 Okay, that is nice to know, so I don't pay capital gain tax, only wealth tax, nice

 

[paulnorthuk]

@travisqtc Just look at the conditions under which a person becomes an active trader (commercial trader) then you will pay tax

 

[actuallyfun]

@smta276603 No capital gain, but you pay taxes on wealth so in the end you pay taxes on the money you made

 

[smta276603]

@actuallyfun Sure, but it’s something like 0,3%. It is hardly comparable to what a capital gain tax would be, when the wealth is invested.

 

[danielf]

@travisqtc May I ask how you calculated the 4000chf difference between the flat tax (B permit) and the tax declaration?

 

[satrebor]

@travisqtc Expense ratio is usually higher for 3a fund. It still has some advantage (exempt from wealth tax, could be pledged for purchasing a house) but I would say without the tax advantage it is better to stick with a regular broker account.

 

[regret_living]

@satrebor There are few more benefits - if you ever drop in salary and have less wealth (as its in 3a etc) you could qualify for healthcare subsidy etc.

For a family thesholds for this are quite high.

 

[travisqtc]

@satrebor I think I will never buy a house in Switzerland since it is a bad investment decision, only a lifestyle choice, I would like to retire abroad, maybe in Greece or Italy.

Thank you for your comment

 

[tobiahjude99]

@travisqtc Without tax benefits it‘s not really worth it, as you are locked out of the money until retirement or leaving the country etc.

But the dividends inside there are also withholding tax free, so small tax benefit still there. Although with the rather high costs (0.39% for finpension) this benefit just makes it about equivalent to investing in VT (ter 0.07%) and taking the 15% withholding tax hit on dividends (of course the dividend tax effect would be bigger when you would otherwise have to declare dividends as taxable income, but then you would deduct the 3a anyway).

 

[travisqtc]

Thank you guys for your responses, you have confirmed that I made a mistake.

Can I somehow take the money out of my 3a and still stay in Switzerland without buying a house or anything like that? Just plain cash and close my account?

 

[divide]

@travisqtc Is there anyway the Tax authorities would back-date the pillar 3a if you did not declare it?

The Tax authorities can easy back-date 10 years of fines but not when it comes to giving you money back its a no go? Or is there a way to do this?

 

[truebeliever344]

@travisqtc If you make more than 120 k (gross) per year, you receive a tax declaration form anyway regardless of your permit status, and there you can add your 3a contributions, etc.

You can also explicitly request to do this if you made less than 120 k. It's called Taxation ordinaire ultérieure in French:

https://www.zh.ch/content/dam/zhweb...lätter/div_q_informationsblatt_qs_2021_FR.pdf

I couldn't find the German version as I don't speak German.

Note that if you do this once, then you must to do it the following years too. You'll automatically receive the tax declaration form.

Also note that it's not beneficial for everyone, you have to do the math beforehand to make sure.

 

[travisqtc]

@truebeliever344 I make less than 120k for the moment, and if I would declare my own taxes I would need to pay 3-4k more in taxes considering every deductions I can make. Thank you for your answer, I think I will stick with IBKR for the moment

 

[isbjorn995]

@travisqtc What’s the main reason why you think you pay more taxes when filing for them rather than quellsteuer ? Do you live in a high tax Gemeinde or have overseas property ?

 

[isbjorn995]

@travisqtc Can’t you just do a neuveranlagung der quellsteuer, not filing proper taxes, where you mention the 3a? That’s what I used to do.

 

[mitchell]

@isbjorn995 No longer possible since 2021. Claiming deductions require being subject to the ordinary taxation scheme.

 

[isbjorn995]

@mitchell Oh that’s why I couldn’t find any information about it .

 

[ngozichukwuka]

@travisqtc The savings of 4000 CHF by remaining with Quellensteuer seem very high. Are you sure you considered all applicable deductions?