Real estate, equities, bonds and more: if you would like to invest your money, you can choose from a whole range of investments in Switzerland. Private investors should always be aware of costs and returns when selecting an investment – and under no circumstances should they ignore the taxation of investment income.

Are you wondering where you can invest your money attractively and what option is best for you? Comparing investment types is based on the final investment income in the form of dividends or interest. After all, the goal of every private investor is to ensure regular income and stability through good dividends or to grow assets over the long term through interest. But there is one key point to bear in mind:

Investment returns are subject to income tax

As a result, income tax reduces returns. As private individuals in Switzerland, your dividends are subject to income tax. If your investment strategy is geared towards high investment income, your tax liability will increase as a result.

Stéphane Franck, investment expert at Swiss Life, is well aware of that. 

Stéphane Franck, investment expert at Swiss Life, on tax-optimised investments. Video by Christoph Jentzsch, Content Creation & Online Marketing @ Swiss Life

Sample calculation: Tax disadvantage

The Roche dividend, one of the largest companies in Switzerland, came to CHF 2.45 in 2019. This corresponds to a gross dividend yield of 3.05%. If you deduct the 30% marginal tax rate, the return will fall to CHF 2.14 after income tax – a tax disadvantage that we can help you avoid.

Investment – how can I avoid tax disadvantages?

The solution is: pillar 3b. Unit-linked non-tax-qualified life insurance is an attractive opportunity for you to avoid being disadvantaged from a tax perspective. After all, if you combine your investment with life insurance, you can enjoy non-taxable dividends and interest income.

Preconditions for the tax benefit for single allocations to pillar 3b are:

  • The policyholder and insured person are identical.
  • Signing of the policy takes place before the age of 66.
  • Benefits are paid after the age of 60.
  • The policy term is at least 10 years – the longer the term, the greater the compounding benefit.

Good news for all private investors: you pay the so-called stamp duty (2.5% of the payment amount) when the policy is set up and you incur risk and administrative costs. Nevertheless, the tax benefit is greater because: if you meet all four requirements, you avoid paying income tax in full on your investment income.

The advantages of unit-linked life insurance at a glance

  • No taxation of investment income
  • Death coverage
  • The policyholder may decide who is to receive the benefits
  • Bankruptcy privilege which protects the family in the event of bankruptcy of the policyholder

Our tip: as a private investor, opt for unit-linked life insurance. And look forward to financial security and a self-determined life in old age.

Image source: iStock, shapecharge 

Swiss Life Premium Comfort

Our recommendation: Swiss Life Premium Comfort Non-tax-qualified life insurance (pillar 3b) combines long-term capital growth with attractive insurance and tax advantages.

Additional articles of interest

Guide

Budget planning for retirement: how much will I be able to afford after I retire?

Read more

Guide

The three-pillar system: no big mystery

Read more

Guide

Pillar 3b: answers to the top questions

Read more