What benefits have cross-border commuters in making a third pillar in Switzerland?
Not only tax advantages with the third pillar 3a, but much more
Let's start at the beginning, as already explained in other articles, every person who is gainfully employed in Switzerland and declares an income to the OASI is entitled to take out a third pillar. For cross-border commuters with withholding tax, the tax authority places additional requirements that must be met, and the procedure for taking advantage of the withholding tax refund is slightly different. One of the requirements, for example, is to receive at least 90% of the income in Switzerland. But be careful, we are talking about all household income (from work, real estate, etc.). This implies, for instance, that if one of the spouses works in another country, the 90 % cannot be reached. In this case, a third pillar 3b is the best solution (see information below). But the tax aspect is not the only one; in fact, it is perhaps the least important. Those living abroad generally find themselves with missing contributions, both in the first pillar (OASI) and in the second pillar (BVG). Just think that the first pillar is mandatory from the age of 21, and the second pillar from the age of 25 (as far as saving for retirement is concerned). For this reason, and given that most cross-border commuters will not receive full benefits, the third pillar should be stipulated to cover their contribution and pension gaps, and benefits in the event of disability and death, regardless of the tax situation and any tax savings at source. But if the tax aspect takes second place, why then make a third pillar in Switzerland and not, for example, a pension fund in the country of residence? First of all because, since you receive your salary in Swiss francs, having the third pillar in the same currency eliminates the exchange rate problem. In addition, Switzerland offers a very stable and secure environment with regard to pensions and the economy in general. Before signing up for a third pillar, however, it is advisable to check your pension situation in order to obtain a third pillar that is perfectly suited to your needs. Our experts are at your disposal for personal advice or a pension analysis, and will be happy to advise you.
Third Pillar Deduction from Withholding Tax
If the conditions described above are fulfilled, you can claim a refund of part of the withholding tax. Or more precisely, you can lower your taxable income with a resulting refund of the amount in your favour. In practice, you have to apply to the withholding tax office for additional ordinary taxation, whereby the taxes are recalculated by deducting, among other things, the amount paid to the third pillar. The resulting difference is then returned to you. Beware, however, because it is not always advisable to use this instrument and the matter should be assessed on a case-by-case basis.
The third pillar 3b
Although identical in terms of product, Pillar 3b offers much more freedom than Pillar 3a, for example: The accumulated capital can be available at any time, whereas in Pillar 3a the capital is tied to retirement age. Pillar 3b does not have a maximum premium limit, so those who have a large savings capacity do not have the limit under Pillar 3a. The beneficiary clause is free, so people outside the circle of legal heirs can be included as beneficiaries. Therefore, Pillar 3b should be seriously considered, especially since the freedom offered by Pillar 3b often outweighs the tax advantages offered by Pillar 3a.
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