Starting from 2025, annuities will be taxed flexibly

Aug 25, 2023 | News

The taxation of life annuities from the 3b pillar will be adjusted flexibly based on investment conditions. By decision of the Federal Council, the Federal Law on the Taxation of Life Annuities and Similar Pension Provisions will enter into force on January 1, 2025.

Until now, 40 percent of income from life annuities was taxed, which was a flat rate. In the case of life annuity insurance according to the Insurance Contract Act, in the future, the taxable income portion of the guaranteed annuity benefit will be calculated using a formula based on the maximum interest rate set by the Swiss Financial Market Supervisory Authority (FINMA). Any excess benefits will be taxed at 70 percent. For life annuities and life pensions according to contract and foreign life annuity insurance law, the taxable income portion will be determined using a formula based on the average yield of ten-year Confederation bonds.

Insurance companies will report annually to the cantonal tax authorities the benefits of life annuities through the Federal Tax Administration (FTA); these notifications will increase control possibilities for the Cantons. In order for the entire notification process to take place electronically, adjustments to the tax authorities’ computer systems are necessary. There may also be adjustments to inheritance tax in Cantons that collect inheritance tax as part of a refund of life annuity insurance premiums in the event of death.

The Federal Chambers approved the reform on June 17, 2022. The referendum period expired unused on October 6, 2022. The draft provides for the Federal Council to determine the entry into force of the law.