Switzerland’s 2025 annuity tax reform: a US life annuity is no longer taxed at 40%
Written by Hans Goldstein, licensed insurance agent · CA 4273294Short answer: since 1 January 2025, Switzerland taxes benefits from a foreign life annuity, such as a US single premium immediate annuity, only on a yield share equal to the 10-year average Swiss federal bond yield plus 0.5 points (DBG art. 22(3)(c), StHG art. 7(2), AS 2023 38). The Federal Tax Administration published 7% for tax year 2025, down from the old flat 40%. A life annuity with no surrender value is also likely outside cantonal wealth tax; confirm with your canton.
Free guide: Moving abroad on a fixed income
Income rules and taxes by country: Norway, Switzerland, Sweden, Italy, Spain, Malta and more, plus how a lifetime annuity fits.
What changed on 1 January 2025
For decades Switzerland taxed most life annuities with a simple rule: 40% of each payment was treated as income, whatever the interest rates were. With Swiss bond yields near zero for years, that rule taxed far more than any real return inside the contract. Parliament fixed it with the federal law of 17 June 2022 on the taxation of life annuities (AS 2023 38), in force since 1 January 2025. It rewrote article 22(3) of the Federal Direct Tax Act (DBG) and article 7(2) of the Tax Harmonization Act (StHG), so the same logic now applies at federal, cantonal and communal level.
The new law splits annuities into three groups:
| Type of annuity benefit | Taxable share since 2025 | Rule |
|---|---|---|
| Guaranteed benefits from Swiss-law life insurers | Set by the maximum technical interest rate when the contract was issued | DBG art. 22(3)(a) |
| Surplus (excess) benefits from those contracts | 70% | DBG art. 22(3)(b) |
| Foreign life annuities, and life annuity and Verpfründung contracts | 10-year average Swiss federal bond yield plus 0.5 points; 0% if the yield is zero or negative | DBG art. 22(3)(c) |
| Before 2025 (old rule) | 40% flat | Repealed |
A life-only annuity from a US insurer falls in the third group. That is the group the reform helped most.
How the yield share works for a US annuity
The share for foreign annuities moves with Swiss interest rates, and it is recalculated every tax year. The Federal Tax Administration (ESTV) explains that the final figure can only be set after the tax year ends, once the annualized yield on 10-year federal bonds for that year is known. For tax year 2025 it published 7%: an average bond yield of 0.11% plus the 0.5-point add-on, rounded. So of every franc your US annuity paid in 2025, about 7 centimes were added to your Swiss taxable income. If Swiss yields rise, the share rises with them; if the 10-year average is zero or below, the share is 0%.
Plain numbers. A $38,340 a year annuity (see the example below): under the old 40% rule about $15,340 of it was Swiss taxable income. At the 2025 share of 7% it is about $2,680. The slice is then taxed at your normal federal, cantonal and communal rates.
The trade-off, once: the share is not frozen. A future rise in Swiss bond yields would raise the taxed slice, although from a low base, and nowhere near 40% at any rate Switzerland has seen in decades.
Why I write about this. My mom is Norwegian, my dad is American, and they’re planning the move from the US to Norway. My mom is the sponsor (the host, or “reference person” in UDI’s words), so Norway’s income test falls on her income, not my dad’s. UDI told us in writing that money in an account does not count as income, and only lifelong income does. Their savings were not the problem; the paperwork wanted a monthly number in the host’s name. The rules in Switzerland are different, but the problem is the same one many retirees hit: the income test, not the net worth. I’m writing this to help others in the same boat as my parents. Read how we worked through the Norway income requirement.
In the same boat? Let’s run your numbers
See roughly what a lifetime annuity would cost to close your income gap, then get my personal read by email. I can help while you still live in the US.
Estimates use the September 9, 2026 ImmediateAnnuities.com payout survey (life only) and a 15% cushion. Illustrative, not a quote.
Example: a 65-year-old American with a $500,000 annuity
Using the ImmediateAnnuities.com survey of September 9, 2026, a 65-year-old man receives on average $639 a month per $100,000 of premium, life only. On $500,000 that is about $3,195 a month, or $38,340 a year, for life. Illustrative, not a quote.
| Item | Old Swiss rule | Since 2025 |
|---|---|---|
| Yearly payment | $38,340 | $38,340 |
| Swiss taxable share | 40% | 7% (tax year 2025) |
| Added to Swiss taxable income | about $15,340 | about $2,680 |
| US taxable part (exclusion ratio, after-tax premium) | about $13,340 | about $13,340 |
The US figure uses IRS Table V: a 65-year-old has a 20-year expected return multiple, so expected payments are $766,800 and $500,000 of that is your own premium coming back. About 65% of each payment is tax-free in the US until the premium is recovered. The point of the table: since 2025, Switzerland taxes a much smaller slice of a US annuity than the US does, so for a US citizen the Swiss income tax on the annuity is now light.
Wealth tax: likely outside, confirm per canton
Every canton taxes net wealth, at combined cantonal and communal rates of roughly 0.1% to 1.0% depending on where you live. The base is total net wealth at market value (StHG arts. 13 and 14). Life and annuity insurance is valued at its surrender value. The Federal Tax Administration’s wealth-tax overview (law as of 1 January 2026) says capital and annuity insurance that cannot be surrendered is not subject to wealth tax, and that the surrender value of a surrenderable annuity stays taxable even after payments start.
So a life-only SPIA with no cash value is likely outside the base. Compare that with $500,000 kept in a portfolio: at a hypothetical combined rate of 0.5%, about $2,500 a year of wealth tax, plus income tax on the returns. That is why, for an American with savings heading to Switzerland, a US life annuity is likely one of the best options. Confirm per canton, in writing, before you buy, and choose a contract with no refund or cash-out feature, because a surrender value brings it back into the base.
The retiree permit: no franc figure, and why an annuity fits
Non-employed people aged 55 and over with special ties to Switzerland can apply for a retiree permit (AIG art. 28, VZAE art. 25). There is no fixed franc figure. The means must exceed the level at which a Swiss resident would qualify for supplementary benefits, the canton decides, and the State Secretariat for Migration must approve. As of October 2026 the Zurich, Geneva and Vaud migration offices publish no franc amount. Geneva states that an applicant has the necessary means when they are certain to benefit from them until death, naming annuities and wealth. A lifetime annuity answers that test directly. Read the permit side in full on the Switzerland retirement and wealth tax guide.
Practical steps
- Buy while you still live in the US. A US agent can only sell to residents of states where he is licensed, and US insurers generally want a US address at issue.
- Choose life-only or joint and survivor with no surrender value: that is what supports both the wealth-tax position and the “certain until death” permit test.
- Start payments before you apply so statements show real deposits.
- As a US citizen you stay taxable in the US. Since January 1, 2026, a US citizen with a foreign residence address cannot opt out of federal withholding, even with a US bank account (Treas. Reg. 31.3405(e)-1). Withholding is a prepayment, not extra tax. A US annuity is not reported on FBAR or Form 8938 and is not a PFIC.
- Ask the canton in writing how it values your contract for wealth tax, and keep the answer.
The trade-offs, once: a life annuity cannot be undone, the payment is level unless you add a cost-of-living rider, it arrives in dollars against franc living costs, and it rests on the issuing insurer’s claims-paying ability. Size it to your income gap and keep liquid savings beside it.
Married? Make the income outlive either of you. In Switzerland the main applicant shows the income and the spouse joins as a family member, so the annuity sits with the main applicant. If a single-life annuity is on one spouse and that spouse dies first, the payments stop, and the surviving spouse may have to show income of their own at the next renewal. A joint and survivor annuity, which keeps paying until the second death, or a separate annuity on each spouse closes that gap. Joint and survivor pays less per dollar than single life, so ask for both quotes and compare.
Frequently asked questions
Free annuity gap analysis for Switzerland. Tell me your ages, your Social Security or pension, and whether you are single or a couple. I will show how far your income is from the Switzerland requirement and what a lifetime annuity would cost to fill the gap, in the sponsor’s or main applicant’s name where that matters.
Related reading
- Moving abroad on a fixed income: hub
- Moving to Norway: my parents' story
- Switzerland retiree permit and wealth tax
- How European countries tax a US annuity
- Wealth tax countries and annuities
- Netherlands Box 3 tax on a US annuity
- Annuity withholding for US citizens abroad
Sources
- Federal law of 17 June 2022 on the taxation of life annuities (AS 2023 38)
- DBG (Federal Direct Tax Act), art. 22, Fedlex
- StHG (Tax Harmonization Act), arts. 7, 13, 14, Fedlex
- ESTV: taxable yield share of foreign life annuities
- ESTV: wealth tax of individuals (law as of 1 January 2026)
- AIG (Foreign Nationals and Integration Act), art. 28, Fedlex
- VZAE (Ordinance on Admission, Residence and Employment), art. 25, Fedlex
- Canton of Geneva: permit without gainful activity, third-country nationals
- IRS Publication 939: Table V expected return multiples
- Treas. Reg. 31.3405(e)-1 (withholding for payees with a foreign address)
- ImmediateAnnuities.com: immediate annuity rates by age (survey of September 9, 2026)
Goldstein & Co. LLC dba Goldstein Insurance Services · Hans Goldstein, licensed insurance agent, CA lic. #4273294 · NPN 20602398 · 213-414-2808 · hans@hansgoldstein.com
Education, not tax, legal or immigration advice. Rules, thresholds and exchange rates change; confirm with the consulate or immigration authority and a local tax adviser before you act, and get answers in writing. Hans Goldstein is a licensed insurance agent (CA 4273294) and can only offer annuities to residents of states where he is licensed. Annuity payments are guaranteed by the issuing insurer’s claims-paying ability, not by any government. Payout figures are illustrations from a published survey, not quotes. Immediate annuities are generally irrevocable.