I know that the benefit to paying taxes early depends on Canton, and also probably changes due to interest rates. In general they seem to give you some small interest on the amount you pay early, and conversely charge you a penalty of interest for the months after the year but before you paid. When is it worth to pay early, assuming you could have the money in a savings account instead? For example in Migros Bank there is a currently a free Sparkonto with 0.5% interest.
Pay tax early? How to decide
- Thread starter kiochi
- Start date
For what concern my situation, I do pay the entire amount in one shot and I don't pay attention if a bank can pay some interest rate. I prefer to start the year to know that I paid most of the bills and so I can focus on my investing strategy. A bank that offers interest rates put condition on the amount that you can pull out of the saving account. Are you referring to this account? https://www.moneyland.ch/en/migros-bank/savings-accounts/savings-account
This is what is written at the beginning:
"General information:
Not suitable for payment services.
12 cash withdrawals or purchases per year are free of charge."
If you add a link to the saving account advertised by Migros, I can try to help you understanding.
This is what is written at the beginning:
"General information:
Not suitable for payment services.
12 cash withdrawals or purchases per year are free of charge."
If you add a link to the saving account advertised by Migros, I can try to help you understanding.
Hi plutonio, thanks for the response. Yes, that looks like the savings account. The account is a savings, so you don't use this as a normal payment account, but you would just keep money there long term. But for taxes it could work, because you only remove money for taxes 1-2 times per year.
I used to pay early, but not anymore. First, the amount is way too large (50k+ in our case). And second, I'd much rather have it invested than get a tiny amount back or get it in a savings account.
Why not invest instead of putting it in a savings account?
Why not invest instead of putting it in a savings account?
If you want to focus on your investing strategy, shouldn't you focus on putting as much as possible in your investments rather than in your taxes?
@Baptiste Wicht Thanks for the response. Yes of course investment returns will normally be much better than a tiny savings interest or bonus for paying early. In my case I would not want to invest this money, however, because basically in some sense I view that it's "not my money" but I owe it to the government already, since I have to pay it sooner or later.
To understand my view, one could consider an analogy- someone offers you a very low interest loan, like 0.25-0.5% (this value is like what the canton bonus/penalty is for paying early/late)-would you then choose to take out a loan of CHF50k and invest it, knowing you will have to pay the full principal at the end of the year? It could be a good strategy to make some money, but it's also risky, because if the market happens to be down when you need to repay (pay taxes) then you sell at a loss and you are dipping into some other assets that were not originally planned.
To understand my view, one could consider an analogy- someone offers you a very low interest loan, like 0.25-0.5% (this value is like what the canton bonus/penalty is for paying early/late)-would you then choose to take out a loan of CHF50k and invest it, knowing you will have to pay the full principal at the end of the year? It could be a good strategy to make some money, but it's also risky, because if the market happens to be down when you need to repay (pay taxes) then you sell at a loss and you are dipping into some other assets that were not originally planned.
I understand the logic. But you do not really need to keep the money available, right?
If you had to keep the 50K to pay later, I would understand the logic. It would not make sense to invest in stocks just to sell in the short-term.
But if you "own" 50K and you can pay them 5K a month, you do not have to store 50K and then withdraw 5K per 5K. You can use your salary to pay these 5K little by little.
But of course, if you really want to keep that money and use it month after month, you will need checkings account or a savings account without any restrictions. Maybe willBe could be good since they have 0.35%, but is it really worth it?
thepoorswiss.com
If you had to keep the 50K to pay later, I would understand the logic. It would not make sense to invest in stocks just to sell in the short-term.
But if you "own" 50K and you can pay them 5K a month, you do not have to store 50K and then withdraw 5K per 5K. You can use your salary to pay these 5K little by little.
But of course, if you really want to keep that money and use it month after month, you will need checkings account or a savings account without any restrictions. Maybe willBe could be good since they have 0.35%, but is it really worth it?
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thepoorswiss.com
I thought that paying the entire amount in advance would reduce the asset. I know that the tax on the asset is quite low compared to the tax on revenue.
Let's say that since I have paid off all my debt in advance, I can invest part of my income and set aside another part to prepay taxes for 2026. I agree that, from an investment perspective, it would be more efficient to pay monthly rather than in a lump sum. I suppose this is an automatic process that I need to implement.
Thank you for the input.
That could make sense if you are paying a large wealth tax indeed. But you are comparing this against stock market returns which returns an average of at least 5% even in CHF. So, you need a significant saving in wealth tax to make up for it.
But of course, in the end, if it suits your finance style and it helps your ease of mind, then it's a good solution.