The Swiss Pension system is based on a 'three pillar' complimentary combination of state, occupational and personal contributions.
1st Pillar - (AHV/IV - AVS)
The first pillar of the pension system is compulsory for the entire working population, and is funded from social taxes. This is designed to provide for the basic income needs in retirement. Contributions are deducted from taxable income and only taxed at the time of payment. Interest on contributions is not taxed.
2nd Pillar - (BVG/UVG - LPP)
Compulsory for all employees in Switzerland, and levied by social taxes payable equally by employer and employee. The percentages levied increase with age, and varies between 7 - 18%. Your pension plan can be 'liberated', with a cantonal tax levied, in certain circumstances, including commencing self employment, leaving Switzerland permanently, or within 5 years of normal retirement age.
3rd Pillar - (3a/b)
The 3rd Pillar is the third tier in the Swiss pension system, and is available to both the employed and the self employed in Switzerland, with differing maximum limits according to your employment situation.
* Employed - Maximum CHF 6,365 (2007)
* Self Employed - CHF30,000 (2007)
There are various types of 3rd Pillar Investments, and although intended as a long term tax efficient Pension 'top-up', withdrawals can be made under certain circumstances, including:-
* Purchasing your principal residence in Switzerland
* Leaving Switzerland permanently
* Becoming self-employed in Switzerland
* Retirement
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Or read more about Income Tax in Switzerland
Thursday, September 25, 2008
Do I need authorisation to buy Swiss property?
In Switzerland expatriates who are considering purchasing property in Switzerland should be familiar with “Lex Friedrich,” the Federal Law on the Acquisition of Real Estate by Non- Residents, a law which has been in force since January 1985. Named after the former federal justice minister Friedrich, it restricts the ownership of real estate in Switzerland by non-residents.
Resident expatriates who may buy property without restriction or special authorisation include those holding a C-permit or working in embassies, consulates, and international organisations. They must have held resident status for either five to ten years, depending on nationality.
EU citizens with a Swiss permit B (and all foreign buyers with a permit C) can buy as many properties as they like. Foreign non - Swiss national buyers without a Swiss permit B or C need a "permit to purchase" (or "authorization") to buy property in Switzerland. Authorisations are obtained through a Swiss notary who applies to the relevant cantonal authority. Each Swiss Canton has a yearly quota of authorizations and it usually takes 3 months to obtain one.
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Resident expatriates who may buy property without restriction or special authorisation include those holding a C-permit or working in embassies, consulates, and international organisations. They must have held resident status for either five to ten years, depending on nationality.
EU citizens with a Swiss permit B (and all foreign buyers with a permit C) can buy as many properties as they like. Foreign non - Swiss national buyers without a Swiss permit B or C need a "permit to purchase" (or "authorization") to buy property in Switzerland. Authorisations are obtained through a Swiss notary who applies to the relevant cantonal authority. Each Swiss Canton has a yearly quota of authorizations and it usually takes 3 months to obtain one.
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Where should I buy property – Switzerland or France?
House prices have historically been very stable in Switzerland, and with capital gains tax levied on individually owned real estate, house purchase in Switzerland is best considered as a lifestyle choice rather than as an investment decision. If the purchase is primarily investment driven, you should be considering a 10 year term if you wish to optimise total returns compared against total purchase costs.
By contrast, France has recently seen quite significant property price growth, and this is particularly true of the French departments which surround Geneva. However with a strengthening Euro v Swiss Franc exchange rate, prices have fallen from their highs recently. Even so it is generally still true to say that you can buy more for your money in nearby France than Switzerland.
There may be resale restrictions on the bought property; in some Swiss cantons, notably the Valais, foreign buyers cannot sell their property within 5 or 10 years of purchase. There may also be restrictions on renting out the property. Switzerland also levies a property tax on a notional rental value of the property, less any related mortgage. The amount payable varies according to each canton. In addition, depending on how long you have owned the property, and whether it is your main residence, capital gains tax may also be due on the sale of the property. This will vary from canton to canton and it may be possible to offset certain property renovation costs against any capital gains tax payable.
On balance, (and excluding any potential restrictions on who may purchase property in each country), the final decision as to where you decide to buy is one based mainly on lifestyle issues, although there are significantly different tax regimes relating to property purchase in each country.
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By contrast, France has recently seen quite significant property price growth, and this is particularly true of the French departments which surround Geneva. However with a strengthening Euro v Swiss Franc exchange rate, prices have fallen from their highs recently. Even so it is generally still true to say that you can buy more for your money in nearby France than Switzerland.
There may be resale restrictions on the bought property; in some Swiss cantons, notably the Valais, foreign buyers cannot sell their property within 5 or 10 years of purchase. There may also be restrictions on renting out the property. Switzerland also levies a property tax on a notional rental value of the property, less any related mortgage. The amount payable varies according to each canton. In addition, depending on how long you have owned the property, and whether it is your main residence, capital gains tax may also be due on the sale of the property. This will vary from canton to canton and it may be possible to offset certain property renovation costs against any capital gains tax payable.
On balance, (and excluding any potential restrictions on who may purchase property in each country), the final decision as to where you decide to buy is one based mainly on lifestyle issues, although there are significantly different tax regimes relating to property purchase in each country.
-------
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Send your questions to expatquestions@gmail.com
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