The insurance agent offers this 3rd pillar insurance, says I shall be able to get tax deduction (around 40%) right after I pay the insurance (I'm being taxed at source), and then when I leave CH in a year (which will make it 2yrs in total) I shall be able to cash it out less some % (8%?).
I'm a Russian resident and I assume there is no pension agreement or whatsoever between RU-CH.
Is it really that easy to get the tax deduction? How difficult is it to withhold the money in the end (on leaving)? How much time does it take to file all the papers? Does anyone have the experience?
Same question is on the 2nd pillar...

if it's a 3a linked to a life insurance, I'd ask exactly the agent how much you could cash-out after 2years. You'll see that it's a quite small amount after tax compared to what you contributed (someone has to pay the insurance).
I'd rather go for a 3a account (like a bank account). As an employed you can contribute 6565chf max per year. So if you are single it's about 13'000chf after 2 years. If self-employed you can put much more.

Yes, it's 3a account and the amount rings a bell. So the question is still "how easy"?... The agent needs to sell the insurance but I have a feeling that I might end up with a headache not being able to get the money and all...

Pillar 3 comes in two parts 3a, 3b. It sounds like you're talking about 3a, as I understand that the tax benefits apply to Pillar 3a only, not 3b. The amount of tax you save will depend on your marginal tax rate - basically the amount you invest per year (up to approx. 6.5k) is deductable from your gross earnings.

You say you pay source tax and you expect the tax saving to be 40%. If your marginal tax rate for source tax is really 40% then you must be earning at a level to be liable for filing a tax return - therefore your source tax is really only a pre-payment against this.

As for withdrawing when you leave switzerland, with 3a I don't think there are any restrictions, but i'm not sure. With pillar 2 there certainly are restrictions, as money withdrawn within 3 years of making additional purchases can be considered tax evasion, and you could be liable for the taxes you initially saved when contributing.

Anyway, as stated below, insurance related investments are usually not good for the short term - if it's the tax saving you want rather than the insurance, go for a simple bank/savings account version of 3a (all banks offer this i think).

Finally, the tax you will pay when withdrawing from the account after leaving the country, will depend on the value you withdraw and the location where the account foundation is registered, but for 2 years of pillar 3a (max 2 x 6.5k) is likely to be much less than 8%.

sorry, are you talking pillar 2 or 3? thanks
(i ask this because you talk about tax saving, which sounds strange with pillar 2)

The bit you quote is about pillar 2 (BVG) as it states. All your contributions into pillar 2 are in principle tax free. However, there is a trap. If you are subject to Quellensteuer (which is calculated based on brutto/gross salary) and do not additionally file a tax form, in effect you do not receive the tax relief explicitly. It may be that the quellensteuer rates make an allowance for this, but it is not transparent.

If you are paying quellensteuer and additionally file a tax form, the quellensteuer becomes a downpayment and you would then be taxed appropriately on your taxable income (ie excluding the amount paid into BVG). You would end up paying or receiving the difference from what you paid in quellensteuer. So in this case your BVG contributions are transparently tax free as they should be.

Because of the tax efficiency, there are restrictions on withdrawal. One issue relating to this has been recently clarified by the tax authorities. My understanding (which is superficial and lacking detail on specifics) is that if you are making 'additional purchase' contributions above the minimum BVG level then no withdrawal of any of your surplus can be made within 3 years of the latest purchase without incurring an additional tax penalty, probably equivalent to the relief originally received on that purchase. One day I hope to get a more precise definition of this - hopefully not after the fact

excuse me, i'm not an expert, what exactly is "Quellensteuer"? the "source tax"? I am about to move to switzerland and really need this kind of info
is what u described normal or do some companies (especially federal institutions) already do it automatically? and what is the name of this tax form?
(btw, can you answer me about this? can 3a pillar be useful in this case? + other questions (eu citizen)

Yes, quellensteuer is German for source tax.

"is...normal or do some compaines...already do it automatically?' - i'm not sure what you mean - do what ? file a tax return for you ? it's possible that some offer such a service - i believe that some offshore/onshore IT service companies do for their staff, but fundamentally it is your responsibility.

"the name of the tax form" - in german the name of the full tax return is Steuererklärung. I believe there are light-weight forms used by source tax payers (mentioned elsewhere in this forum) for recovery of tax relief from e.g. 3rd pillar contributions - I don't know about those.

I made a reply on the other thread you linked to.

exactly, can it be done with this software?
http://www.steueramt.zh.ch/html/steu...g/software.htm

for the 2nd pillar, do we get 100% back? or a portion of it?

i just checked my latest statement, apparently I pay 228.55 CHF and my employer pays 342.8 CHF each month. Do I get reimbursed for the part I pay or for both?

Good question. Anybody knows the answer?

You get both portions back provided you fullfill certail conditions:-
1. permanently leave Switzerland
2. become self employed
3. retire to a sunny place

You have to pay tax on this which in Zurich is 14%. You can reduce this by opening a vested benfit account in a low tax canton like Scwhyz (sp)

You can get back 100% of your "guthaben/avoir veillesse" which comprises both the employers and employees contributions that were not destined for the insurance component (death in service, invalidity) of the pension fund benefits.

Note to get it paid out, if you are leaving the EU permanently eg back to Russia you can get 100% back. Leaving to within the EU there is a misconception you cant get it back, but this is only true for the "compulsory" portion. The over-obligatory part you can get back.

Yes Danny this is right. If you permanently leave Switzerland to another EU country you can have part of it paid to you as a lump sum. I am in this situation and it is a nice leaving present

It depends on where you're moving to, and where you're a national of.

We were moving to the US, so were able to transfer the employer/employee contributions into a 'compte de libre passage' (special bank account into which you have to transfer your pension pot upon leaving a company). Our compte was with UBS, which is headquarted in Basel. We then cashed out this account and took the money and put it in a normal bank account, and paid a nominal amount of withholding tax based on the Basel registration (even though we lived in Vaud) - from memory, this was 4.6%. This is of course a STUNNING deal - pension cash, scarcely taxed at all, and unlocked into normal cash independent of age! Of course, you have to bear in mind that you now won't be receiving a pension equating to those years of employment, and plan accordingly.

Part of our 2nd pillar was held back and not able to be transferred/ cashed out, because we are UK (and therefore EU) citizens. My impression was that this was the bit that would ultimately buy a state pension in whichever nation state we end up. If, for example, we're in the UK, then we would have 4 years' credit from our time in Switzerland to put towards our UK pension.

Different rules apply if you've made voluntary over-contributions to the 2nd pillar, to buy extra years, etc. Various tax/bank people asked if we had made such payments within 3 years of our departure, and looked relieved when we said 'no', so I got the impression this would greatly complicate matters.

__________________
'Chance favours only the prepared mind.'

Does anyone know timing on when this is normally paid out?

Is it quite quick or something that takes months?

Really quick - took about a week to set up the compte de libre passage to have it transferred into (for a better cash out tax rate), and then overnight wire to our normal bank account.

If you're married, your spouse has to sign off the cash out, and it has to be notarised; that's mostly what took the time.

Depends on where you are going to. The German tax authorities consider this as cash income and will likely try to tax you on that.

hello everybody, i was looking into the 3rd pillar.
is this confirmed?