Practical Information

Finances & Tax Regulations

Switzerland has a "three pillar" social insurance system. The first pillar provides a basic old-age pension, a pension for surviving dependents and an invalidity pension for those unable to work for health reasons. Everyone must contribute, whether working or not. The second pillar is compulsory only for employed people. Employers and employees contribute. The third pillar is optional: it is a savings scheme with tax advantages to provide extra benefits on retirement. Contributions to pillars I and II are tax-free, but tax must be paid upon withdrawal. For the third pillar, you can choose to be taxed either at source or when you withdraw the funds.

As of 2007, if average annual income is less than or equal to 38,700 CHF, the basic old-age pension is a flat-rate amount of 9,1546 CHF a year plus a variable amount. This is calculated by multiplying annual income by 13/600; if average annual income is above 38,700 CHF, a flat-rate amount of 13,416 CHF a year plus a variable amount calculated by multiplying average annual income by 8/600.

Those 65 and over can begin to collect the old-age pension. The minimum base pension is 1,075 CHF a month, with the maximum being 2,150 CHF a month. The combined individual pensions of a couple cannot exceed 150% of the maximum old-age base pension (3,225 CHF a month).

Retired foreigners with no income activity can choose to pay a lump sum annual tax, which is calculated on their rental payments (or the rental value of their house or apartment), and which has no relation to their real income or wealth, which can often make a significant difference in your tax bill. Otherwise, those with no income will have their tax bill calculated on their assets. You need to be a Swiss resident with a B or C permit, and not have worked in Switzerland for the last 10 years.