How can I reduce my taxes?

Why do I feel like I’m paying more taxes every year?

Taxes are calculated according to rules based on your income, expenses, assets and debts.

The increase in your tax bill can therefore come from a number of different sources, but in most cases it’s the steady rise in your income. After all, an employee’s salary often tends to increase each year with the experience gained in the position. The same applies to the self-employed and entrepreneurs: the more they work on their businesses, the more their income increases.

For example, if you’ve decided to increase your deductible in order to pay a lower health insurance premium, since health insurance premiums are tax-deductible, you’ll deduct less and therefore pay more tax.

All subsidies such as health insurance grants, housing benefit and child benefit are also considered taxable income, and you will pay additional taxes if they are granted or if their amounts have increased.

Okay, so are there ways to pay less tax?

Yes, there are ways of paying less tax, but in most cases this can lead to a short- to medium-term loss of liquidity for the taxpayer.

For example, one of the most common tax-saving tricks is the third pillar, a financial product designed for retirement or income protection in the event of disability or death.

The third pillar reduces your taxable income by its direct value. We’ll show you how:

Let’s take the example of Pierre, who is a baggage handler, single, with no children, an annual income of CHF 60,000 and a 100% job. Pierre is a foreigner with a B permit and is subject to withholding tax.

On 01.01.2019, Pierre decides to take out a retirement savings plan where he pays CHF 300/month, i.e. CHF 3,600/year. His income hasn’t changed since 2018, therefore:

Peter’s 2018 tax bill, before the third pillar:

Taxable income: CHF 60,000

Tax rate: 9.96

Taxes deducted in 2018: CHF 5760

and taxes deducted in 2019, i.e. after the third pillar has been taken out:

Taxable income: CHF 60,000 – CHF 3,600 = CHF 56,400

Tax rate: 8.86

Taxes deducted in 2019: CHF 4997

This third pillar therefore enabled Pierre to reduce his taxes by CHF 763, i.e. a reduction of 21.19% of the amount invested in the third pillar.

Now, if Pierre had taken out his third pillar for CHF 500/month or CHF 6,000/year, the reduction would have been CHF 1,278, or 21.3% of the amount invested.

In the meantime, you can contact us for a study of your personal case or do it yourself with the state tax calculator at the following link:

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