What do pillar 3a taxpayers subject to withholding tax have to bear in mind?

Persons with a B residence permit are subject to withholding tax in Switzerland. Here, there are three ways of taxation since the withholding tax reform of 2021.

• If the gross annual income is below CHF 120’000, payments into the 3rd pillar can only be deducted if a subsequent ordinary tax assessment is applied for (see below). A correction of the withholding tax due to additional deductions (e.g. payment into 3rd pillar) can no longer be submitted from the tax year 2021 due to the withholding tax reform.

• If the gross annual income exceeds CHF 120’000, the subsequent ordinary tax assessment is mandatory. Payments into the 3rd pillar can be deducted.

• If income not subject to withholding tax (e.g. pensions, maintenance contributions, income from self-employment, interest, dividends or rental income) is received or if there are taxable assets (e.g. real estate), a subsequent ordinary tax assessment is mandatory regardless of the gross annual income. Payments into the 3rd pillar can be deducted.

Subsequent ordinary tax assessment

The application must be submitted by March 31 of the following year at the latest or before deregistration in Switzerland. Taxation is at the ordinary tax rates of the municipality of residence and the withholding tax is credited against the tax liability. The ordinary assessment remains in force until the end of the withholding tax obligation. Therefore, once an ordinary assessment has been made, it is not possible to switch back to pure withholding taxation.

For this reason, in these cases the personal situation should be clarified with a tax advisor, taking into account possible future personal and professional developments. Although deductions can be claimed within the framework of the tax assessment, e.g. for the payment into the 3rd pillar, the tax rates of the municipality of residence can be higher than the withholding tax rate, which can consequently lead to an additional tax burden despite tax deductions.

Disclaimer:

VIAC does not offer tax advice and recommends to clarify tax matters in advance with a tax expert and/or the cantonal tax authority in any case. Although VIAC has carefully researched the above content and information, no guarantee can be given for its correctness and completeness. Any liability is rejected.