The Third Pillar and Tax Deductions

The tied third pillar (3a) can be deducted from your taxable income, for the max provided by law during the contract term. In practice, the annual premium you pay to the 3rd pillar 3A is deducted from your taxable income, thus changing the rate that is applied to calculate your taxes. Depending on your taxable income, paying the maximum amount to the 3rd pillar means saving around CHF 1'500 - 1'800 per year. Whereas at maturity, when you withdraw the capital, you will have to pay income tax at a reduced rate. Please note: for this tax, all capital from the pension plan, i.e. also from the second pillar (BVG), must be added up. For those who are taxed at source, such as cross-border commuters (permit G), or persons with permit B (withholding tax), the principle is basically the same, but since the withholding tax is paid in advance, you have to apply for 'additional ordinary taxation' in order to claim the third pillar deduction. This way, if all requirements are fulfilled, the withholding tax office will recalculate the tax, refunding what was overpaid.

The free 3rd pillar (3b), unlike Pillar 3a, cannot be deducted from tax during the contractual term (except in one special case, for which you can consult us). But at maturity, when you withdraw the capital, you will not be taxed on your income, but on your wealth.