For many foreigners, Switzerland is a tax paradise. This is particularly true if you come from Scandinavian, which as you know has the world’s highest tax burden. Although tax in Switzerland is low, it is possible to go even lower. My-switzerland.info has a number of tax tips ready for you which you can apply on an equal footing with the local population in Switzerland. Below we explain the most used: a capital pension (pillar 3a) with great tax advantages and a sensible flexibility.
A and B tax in Switzerland
As a newcomer, most experience that the vast majority of employees have to pay withholding tax (tax at the source). That is when the salary is paid, a tax on account is withdrawn from the gross income. This is the same technique as used in Sweden. In Switzerland it is not a normal practice. This tax will only be calculated as a tax at the source for newcomers without a residence permit C (“Aufenthaltsbewilligung C”). Most have a “B” permit for the first five years. When you receive a residence permit C, you pay the tax later like the local population; this is what we know as B-tax. The two charging systems (A and B tax) differ in terms of both the tax rate and the deduction options.
Pillar 3a since 1986
Because of insecure prospects from the 1st pillar (state pensions) and 2nd pillar (corporate pension), the government in Switzerland has since 1986 opened the tax-free savings in the 3rd pillar. It is something that us foreigners can enjoy.
Tax Tips number 1 in Switzerland
Today, there are nearly 4 million accounts and policies in Pillar 3a in Switzerland. It is by far the most sought-after tax instrument in Switzerland. The product is characterised by tax deduction all the way into the marginal tax as well as a minimal taxation when paid out.
Example (withholding tax, Aufenhaltsbewilligung B):
A resident in Switzerland who earns CHF 60,000 per year starts a saving under pillar 3a. The tax saving represents 20.1% of the amount paid. Remember also to inform the authorities in writing and apply for recalculation of a tax on account. My-switzerland.info can moreover help with both the establishment of a pillar 3a and the subsequent review.
Example (normal tax Aufenthaltsbewilligung C)
A resident in Switzerland who earns CHF 120,000 starts a saving under pillar 3a. The tax saving represents 28.3% of the amount paid. At a higher salary of CHF 150,000 per year, the saving is totally 31.8%. Put in another way, for every CHF 100 which is gained in salary, you get CHF 31.8 back in return in taxes.
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