Mistake when withdrawing capital Valais manager uses legal tax trick - and gambles away

A manager from Valais saved taxes by buying into a pension fund. He then withdrew money too quickly. This is now costing him dearly.

A third of high earners in Switzerland make large tax deductions every year by paying large amounts into their pension fund. This was recently revealed by a data survey conducted by the SonntagsZeitung newspaper.

A top earner from the financial sector in Valais also used this legal trick to optimize his tax burden. Between 2015 and 2017, he made payments into his pension fund totaling over one million francs, reports the "Walliser Bote".

According to the law, such amounts may be deducted from taxable income. However, a blocking period of three years applies before lump-sum benefits can be withdrawn again.

Blocking period not observed

However, in August 2018, less than three years after the last payments, the manager withdrew CHF 500,000 from the pension fund. According to him, the reason for this was his divorce and the need to settle mortgage debts.

The tax authorities deemed this to be a breach of the statutory retention period and corrected the tax assessments for 2016 and 2017. According to the report, the resulting back taxes are likely to amount to a six-figure sum.

Courts reject appeals

Despite multiple appeals, both the cantonal court and the Federal Supreme Court argued that the additional taxation was justified. The manager was unable to credibly prove either a loss of income or a telephone assurance from the tax authorities. The judges emphasized that individual circumstances, such as divorce consequences, do not justify an exception to the clearly defined blocking period.

The manager must now bear the court costs of CHF 6,500 and the high additional tax amounts. His argument that there were no abusive intentions behind his actions was unsuccessful.