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Old 30.10.2016, 20:38
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Deduction of 3. Pillar for Quellensteuer

I have recently discovered that also Quellensteuer persons may ask for deductions on contributions to pillar 3a.

This year the maximum contribution to pillar 3a for employees amounts to CHF 6,768. If I put this money on my account, does this mean I can get back CHF 6,768 times my withholding tax percentage? (E.g., 676.8 with a withholding tax percentage of 10%.)

It should be this way given that, if you withdraw from a 3. pillar account (e.g. by leaving CH), you would pay a tax corresponding to the amount that you would pay in one year on that income.

Many thanks!

Last edited by Ciuccio; 30.10.2016 at 20:50.
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Old 30.10.2016, 21:12
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Re: Deduction of 3. Pillar for Quellensteuer

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I have recently discovered that also Quellensteuer persons may ask for deductions on contributions to pillar 3a.

This year the maximum contribution to pillar 3a for employees amounts to CHF 6,768. If I put this money on my account, does this mean I can get back CHF 6,768 times my withholding tax percentage? (E.g., 676.8 with a withholding tax percentage of 10%.)

It should be this way given that, if you withdraw from a 3. pillar account (e.g. by leaving CH), you would pay a tax corresponding to the amount that you would pay in one year on that income.

Many thanks!
You get the tax difference of having a lower salary by 6,768, assuming your allowed to do a tax return.
If you withdraw after leaving CH, your not taxed as a non resident, so your assumption is incorrect.
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Old 30.10.2016, 22:05
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Re: Deduction of 3. Pillar for Quellensteuer

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You get the tax difference of having a lower salary by 6,768, assuming your allowed to do a tax return.
If you withdraw after leaving CH, your not taxed as a non resident, so your assumption is incorrect.
Thanks for answering!

Are you sure that if I left CH I would not be taxed at all? Here I read:

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If you withdraw funds from a 3rd pillar pension plan before you reach the official retirement age, these will be taxed at a much lower rate and separately from other income. There is a one-off tax which corresponds to the amount that you would pay in one year on this income.
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Old 30.10.2016, 23:36
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Re: Deduction of 3. Pillar for Quellensteuer

You get taxed on P3 withdrawal even if not a resident anymore. The rate used is that of the canton where the institution holding P3 account is registered rather than the canton where you were resident prior to departure.
In any case, the highest rate for up to 100K withdrawal is around 4.7%, which is always less than the income tax you would have paid on the money had you not put it in P3. Some cantons have a progressive rate (Geneva would only take some 1.2% of the 50K withdrawn, others have a flat rate regardless of the amount)
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Old 31.10.2016, 11:24
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Re: Deduction of 3. Pillar for Quellensteuer

When reading the forum I found info somewhere that in some cases by paying into the 3rd pillar and then doing a tax return, you might end up paying more tax than your usual Quellensteuer. This would be due to a default tax deduction included within the Quellensteuer, to the effect of 10.000chf, that does not apply if you do it manually (ie by doing your own tax return you are responsible for listing all of your deductions).

I've even started a topic about that but I'm still not sure how that works. Personally, I have zero things to deduct (no commute, work lunches, medical costs etc), and my only potential deduction would be from a pillar 3, hence not worth it?

Could anybody explain like I'm five if I'm mistaken or not? I fear that in terms of financial literacy I might be around that age anyway.
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Old 31.10.2016, 11:44
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Re: Deduction of 3. Pillar for Quellensteuer

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When reading the forum I found info somewhere that in some cases by paying into the 3rd pillar and then doing a tax return, you might end up paying more tax than your usual Quellensteuer. This would be due to a default tax deduction included within the Quellensteuer, to the effect of 10.000chf, that does not apply if you do it manually (ie by doing your own tax return you are responsible for listing all of your deductions).

I've even started a topic about that but I'm still not sure how that works. Personally, I have zero things to deduct (no commute, work lunches, medical costs etc), and my only potential deduction would be from a pillar 3, hence not worth it?

Could anybody explain like I'm five if I'm mistaken or not? I fear that in terms of financial literacy I might be around that age anyway.
I would be really interested as well!
As far as I could figure it out, the additional saving would be around 1/3 of the payment to the 3rd pillar. So if I pay 6000/year, I could get back 2000.
I am not really sure if that tax return goes directly to my 3rd pillar account or to my standard bank account... Does anybody have experience with that?
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Old 31.10.2016, 11:51
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Re: Deduction of 3. Pillar for Quellensteuer

A tax return always will go to your bank account. Unless you have a C permit, sometimes they keep it and allocate it to your tax payments for the next year
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Old 31.10.2016, 20:05
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Re: Deduction of 3. Pillar for Quellensteuer

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I would be really interested as well!
As far as I could figure it out, the additional saving would be around 1/3 of the payment to the 3rd pillar. So if I pay 6000/year, I could get back 2000.
I am not really sure if that tax return goes directly to my 3rd pillar account or to my standard bank account... Does anybody have experience with that?
I am also very interested in this topic! Also because I have some money invested in stocks and I might receive some extra deductions.

However, I don't think that you would get so much taxes back from the 3rd pillar. (Or at least in Canton Zurich, where it seems that you also live.)
Unless you earn more than 120k, at which point you would not be Quellensteuer anymore (apart from Geneve), the withholding tax rate should be capped at about 10% for Quellensteuer. Hence, you should get back max 600 if you put 6000 per year.
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Old 31.10.2016, 20:08
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Re: Deduction of 3. Pillar for Quellensteuer

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You get taxed on P3 withdrawal even if not a resident anymore. The rate used is that of the canton where the institution holding P3 account is registered rather than the canton where you were resident prior to departure.
In any case, the highest rate for up to 100K withdrawal is around 4.7%, which is always less than the income tax you would have paid on the money had you not put it in P3. Some cantons have a progressive rate (Geneva would only take some 1.2% of the 50K withdrawn, others have a flat rate regardless of the amount)
Thanks for the info! This justifies why some people advise to open as many 3rd pillar accounts in different cantons as possible. I guess in order to "diversify" your taxes against changes in regulations.
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Old 31.10.2016, 20:35
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Re: Deduction of 3. Pillar for Quellensteuer

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Thanks for the info! This justifies why some people advise to open as many 3rd pillar accounts in different cantons as possible. I guess in order to "diversify" your taxes against changes in regulations.
Also because you need to take out the full amount in one go. So if all your savings are in one pot, you need to take it all even if you do only need a smaller amount. Which is why I have a couple of pillar 3 accounts
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Old 08.01.2017, 17:02
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Re: Deduction of 3. Pillar for Quellensteuer

I reopen this thread because I am still deciding whether I should put money on a 3. pillar account and ask for tax deductions. In fact, I have heard that it is quite difficult to get your money back from a 3. pillar account in case you leave Switzerland for good, as banks do not generally trust you and you need to wait for a long time.

I am taxed as Quellensteuer and do not know either if I will still be in Switzerland in three years or if a 3. pillar account is really worth the hassle: it is still unclear to me how much money you would get back as tax deductions.

What would you do in my shoes?
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Old 08.01.2017, 17:23
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Re: Deduction of 3. Pillar for Quellensteuer

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I reopen this thread because I am still deciding whether I should put money on a 3. pillar account and ask for tax deductions. In fact, I have heard that it is quite difficult to get your money back from a 3. pillar account in case you leave Switzerland for good, as banks do not generally trust you and you need to wait for a long time.

I am taxed as Quellensteuer and do not know either if I will still be in Switzerland in three years or if a 3. pillar account is really worth the hassle: it is still unclear to me how much money you would get back as tax deductions.

What would you do in my shoes?
Ponder about it an other 11 Months.

If you intend to leave after three years the pillar 3 could be worth.
If you intend to stay longer than 5 years read and follow the discussion 3rd Pillar Pension Fund

You are the first to say it is difficult to get it back.

One thing to consider ch.ch is not correct about the payout tax. The tax is only one fifth of what you would pay as income tax on the same amount.

Art. 38 Federal tax law.
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Old 08.01.2017, 17:45
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Re: Deduction of 3. Pillar for Quellensteuer

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I am still deciding whether I should put money on a 3. pillar account
Too late for 2016. You can now take all time you need to make a decision until late December 2017.

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In fact, I have heard that it is quite difficult to get your money back from a 3. pillar account in case you leave Switzerland for good, as banks do not generally trust you and you need to wait for a long time.
You'll get it either way, may take longer - they might pay only after you register in the new country, but you'll get it. What can be a cause of concern is the tax treatment of this payment in your new country if it gets paid after you've registered there.

Also, you basically have to go through the same exercise with your pillar 2, which works in a very similar way. And you don't have the liberty of choosing to not have it.

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it is still unclear to me how much money you would get back as tax deductions.
Your marginal tax rate, 20-30% is a good guess

Last edited by ivank; 08.01.2017 at 18:18.
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Old 08.01.2017, 19:23
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Re: Deduction of 3. Pillar for Quellensteuer

Excellent replies, many thanks!
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