Tax advantages
Anyone taking out Pillar 3a life insurance can look forward to a lower tax bill under certain circumstances. However, life insurance also involves tax liabilities. Find out here how you are guaranteed to reduce tax and what you must consider to ensure that your life insurance policy is properly taxed.
Save tax - this is how it works
You can systematically save tax with life insurance, mainly through the statutory provisions of Pillar 3a. To do so, the pension contributions you have paid in (employees up to CHF 6,826 and the self-employed up to CHF 34,128 p.a.) can be deducted from taxable income. This reduces the annual tax burden.
Correct declaration on your tax return
This is how you have to declare your life insurance on your tax return to benefit from the tax deduction:
Pillar 3a life insurance
Regular premium payments or contributions can be declared under the heading “Contributions to recognized forms of tied private pension provision (Pillar 3a)”. Here the maximum value for private individuals is CHF 6,826, and for the self-employed CHF 34,128 p.a.
Pillar 3b life insurance
These contributions can be recorded on your tax return under the heading “Insurance premiums and interest from savings capital”. Here too, there are maximum permissible deductible amounts that vary depending on the individual situation. They are based on payments made into Pillar 2 (pension fund or occupational pension scheme) or into Pillar 3a.
It is important to bear in mind that health insurance premiums can also be entered under this heading. If the maximum deduction under the heading is reached when health insurance premiums are entered, no further deductions can be made through Pillar 3b.
Tax liability
In Switzerland, life insurance is subject to wealth tax under the provisions of Pillar 3b. If you take out Pillar 3b life insurance, you must therefore declare it on your tax return. We have summarized the key provisions for you concerning the tax liability of life insurance.
Life insurance that can be surrendered is subject to wealth tax.
A policy that can be surrendered means it is clear that the insured risk (death or survival) will occur, but it is unclear when. Policyholders can cancel these types of insurance contracts and ask the insurer for the surrender value, provided that the insurance premium was paid over a period of three years. This type of life insurance is subject to wealth tax.
Saved capital under Pillar 3a
Assets that have been saved with life insurance through Pillar 3a (e.g. with the Pillar 3a pension account) are not subject to wealth tax. Income tax at a reduced rate only becomes due if Pillar 3a is regularly paid out after retirement.
