How to save on tax in Switzerland

You can deduct payments made into a restricted pension plan (pillar 3a) from your taxable income. And this is regardless of whether it is a 3a policy with an insurance company or a 3a savings account with a bank. The maximum deposits are however limited. You can close any shortfalls in your pension fund (2nd pillar) with purchases that are generally tax-deductible. However, you should not only consider purchases into your pension fund from a tax perspective, as it is also important to plan well.

You can claim any medical or accident costs that you have paid yourself and that are not covered by any insurance. Medical costs include, in particular, doctor's, dentist's, hospital and spa costs, which you have paid yourself, after deducting all benefits from public, professional or private insurance companies and institutions. In most cantons, and also at the Confederation level, self-paid costs must amount to at least five percent of net income in order to be deductible.

You may deduct a lump sum amount for insurance and health insurance premiums, which varies from canton to canton. Furthermore, you are also allowed to deduct life insurance premiums. Because the lump sum amount is lower than the health insurance premium alone in many cantons, you can no longer deduct anything else for other insurances. However, there are also some generous cantons that allow a lump sum deduction of up to CHF 10,500 for married couples.

You are allowed to deduct a lump sum from your taxable income for each minor child. You may deduct the lump sum for children of full age as long as they are in initial education. The specifications and lump sum amounts vary from canton to canton.

As a rule, you may deduct the costs of ongoing vocational training from your taxable income as long as it is not initial education or training. The lump sum amount varies from canton to canton; you must provide evidence for higher deductions.

You are allowed to deduct the travel costs for your way to and from work. For example, the costs of the Swiss public transport pass and a flat rate amount for the bicycle. Under certain circumstances, you may even deduct the costs of the Swiss public transport pass and a car if, for example, you can only reach the station by car. The Confederation and the cantons allow different deductions depending on the means of transport. Other professional expenses that you may deduct as a lump sum or with proof include professional clothing, computers, specialist books and meals away from home.

They are allowed to deduct value-preserving investments and energy renovations that save energy and protect the environment. For example, sanitary, plumbing, painting or carpentry work, heating maintenance, oil tank cleaning or washing machine repairs and gardening work, such as the replacement of perennial plants, are considered value-preserving. Energy-saving measures include new windows and doors, façade insulation and heat pumps. You can deduct the costs as a lump sum or the actual costs (with proof). The Confederation and most cantons allow a flat rate of 10 percent of the imputed rental value for newer properties and 20 percent for older properties. In addition to this, homeowners may deduct the premiums for building and building liability insurance and supplementary insurance. Condominium owners can deduct their contributions to the renewal and management fund of the owners association, provided they are used for value-preserving measures.

Depending on the pension fund regulations, you can draw your pension fund balance as a monthly pension, as a lump sum or as a mixture of both. You have to pay tax on the pension as income; the lump sum withdrawal is taxed once and separately from other income at a reduced tax rate. That is why you pay less tax at the end of the day if you withdraw all or part of your assets as a lump sum.

With regard to direct federal tax, married couples can deduct a flat rate of CHF 2,600. The cantonal flat rate varies from canton to canton. In addition to this, spouses that are jointly taxed may deduct half of the lower salary for federal tax purposes. The cantonal regulations vary here, as well. If both spouses are gainfully employed, each should pay the maximum amount into a separate pillar 3a solution.

You are allowed to deduct the payments into pillar 3a from your taxable income and therefore reduce your tax burden. Employees and self-employed persons who are affiliated to a pension fund may pay in and deduct up to CHF 7,056 (2023). Self-employed persons who are not affiliated to a pension fund can pay in and deduct up to 20 percent of their net income subject to AHV / OASI contributions, up to a maximum of CHF 35,280 (2023). For every 1,000 francs paid in, you can save between 150 and 400 francs of tax, depending on your income and place of residence.

 The credit balance (assets) and any interest income are not taxed until they are paid out. However, the credit balance is then taxed separately from income when it is paid out. This capital benefit tax is progressive. That is why you should have several 3a solutions and liquidate them in different years in order to optimize your tax burden. A capital withdrawal is possible five years before reaching the AHV / OASI retirement age. Each 3a solution must be liquidated completely.

As long as your retirement assets have not reached the maximum permitted amount as shown on the pension fund statement, you can close pension gaps with purchases. Such shortfalls occur if your employment is interrupted, for example for pregnancy or studies, or you change jobs and are entitled to higher benefits from the pension fund of the new employer. You may deduct purchases into the pension fund from your taxable income. Before you pay in any amount, you should talk to a pension specialist and check whether the purchase makes sense - and also clarify how well the pension fund is financed.

In many cantons, interest is paid on the money if you pay your tax bill early - and usually at a higher interest rate than on a savings account. On the other hand, you will have to pay hefty interest on late payments if you pay your tax bill too late.