2nd and 3rd pillar after leaving Switzerland

Banks, Insurances & Third Pillar
6

Thanks a lot for that. I found the same document in German from kanton ZH. In my case (Greece) it’s a yes.

In addition, the double tax treaty of Switzerland and Greece states:
“Article 18
Pensions
Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration paid to a
resident of a Contracting State in consideration of past employment shall be taxable only in that State.”

Given that in order to cash out 3a early, you’d need to be a permanent resident of another state, and that the 3a payment is taxed to the state you reside in, it turns out 3a should be avoided altogether for most people wishing to withdraw their 3a early, right?

Unfortunately I did my first 3a payment last year so there is no going back, but at least it is only 6.8k and I can stop making payments anymore. Is there some sort of loophole around that at least? Can you cash out your 3a simply by leaving Switzerland and not registering in your new country? Or if you stay over 6 months in that year in Switzerland?

Cheers!

1 Like
7

Indeed for 2 & 3 pillar it would be nice to get the money back and pay less tax than was initially “saved”

Here are the ideas I heard about so far:

  1. Move first to a country where 2 & 3 pillar withdrawals are not taxable e.g. UK
  2. Leave employment and become independent before leaving CH which allows you to withdraw pension. Pay taxes but at a reduced rate depending on the Canton of residence
  3. Withdraw money to buy a primary residence in your destination country whilst still resident in CH (not sure how this works, might it be possible if you have family and they move before you leave CH?)

Also in the case of Spain I read that if you want to withdraw the mandatory part of 2nd pillar the swiss pension institution needs a confirmation that you have registered in Spain and are not subject to social security. So no option to “forget” to declare it. I do not know if the same applies to the extra mandatory part of 2 pillar or to 3 pillar.

8

FYI mandatory part is regulated and can rarely be cashed out when moving to EU so it’s expected.

For the supplementary part, it seems to be a popular move to somehow omit to declare in the new country (which is at least ethically questionable). There’s likely little enforcement since my understanding is that those are not (yet?) covered by the data sharing agreement with tax authorities.

I wouldn’t want to be audited by the new residence country though :slight_smile:

edit:

Might be definitely worth it (e.g. malta) for a few months depending on the amounts. Also even if it’s taxed, check what the tax rate is, sometimes it’s not very high (pension payment are often not counted as regular income).

2 Likes
9

Thanks for the info Barto it’s interesting and maybe I’ll change my back to Spain…I dont want to pay a lot of taxes in Spain (23% I think…) for my 2,3 p.

Maybe go to UK (I dont like :slight_smile: ) or another country with lower fees that Spain…

1 Like
10

Whether you are able to withdraw the mandatory part seems to depend on whether you need to pay social security in the destination EU country. If you don’t work you may be able to claim a payout of the mandatory part back too.

Based on the second part of your answer it may be smart to leave the mandatory alone in CH and only withdraw the supplementary part of 2 pillar and 3 pillar. Perhaps they are viewed differently. Do you have any sources about this?

11

Calculate time until the tax return has been submitted and your tax auditor is ready to stamp your tax-at-source reclaim form. Can take up to 2 years. Here’s how to do it (in German, use the translate function on the site)

2 Likes
12

Depending on the destination country. Some countries, many people can. Others… hardly anybody.

I would suggest to take a look at Portugal, if one isn’t particular about the destination country to move.

13

I asked my pension fund:

  1. If I leave Switzerland permanently, what is required to pay out the extra-mandatory part of my 2 pillar as a lump sum? A) We need a leaving permit from population office of your canton of residence
  2. Can the lump sum ever be paid out before the official date of ending residency so that it is taxable at the applicable rate in my canton of residence? A) Not possible, against the regulations. Only after the leaving date
  3. I understand that is possible to withdraw the mandatory part of the 2nd pillar when moving to an EU country if you are not subject to pay social security in the destination country. What is required? A) The BVG-amount must go to a libre passage account of a Swiss bank (law) and you can only close this once 60 years old.
    (note: I read elsewhere that there is a lot of confusion on the rules on this last part)

In summary omitting to declare in the destination country could be a strategy but I value sleeping at night

14

Apparently from January 1st (thanks to Brexit) people moving to the UK can cash out all of their pension assets, without any requirement on the social security status.

https://news.liberty.ch/en/news/artikel/?tx_ttnews[tt_news]=1034&cHash=a4555da188255327f0c65abac02ce9ef

1 Like
15

Correct.

Even people that moved there earlier, when it was still considered a EU/EFTA country.

3 Likes
16

link to an overview of income tax treatment of 2nd and 3rd pillar insurance products in Europe from 2017

In summary

  1. Double Tax Agreement between CH and the respective country determines in which country the 2nd and 3rd pillar are taxable (see post above)
  2. The overview in this post gives an overview how the tax is applied in each country

Example: leave CH permanently to Spain and withdraw 2 & 3 pillar. CH -ES DTA says pensions are taxed in the country of residence → Spain . According to the overview in this post the amounts would be taxed in Spain as earned income (not savings income). Marginal rate depends by region. Example: Catalunya 48% on amounts over Eur 175k

2 Likes
17

I am bumping this thread since I thought it might be the best thread discussing the tax consequences on the 2nd and 3rd pillar after leaving Switzerland.

I am currently debating if I should diversify my portfolio by investing in the 3a pillar. I am aware of the tax benefits (tax reduction based on marginal tax rate, no tax on dividends, and no wealth tax), however, I am slightly concerned about what would happen if I emigrate before retirement.

I read here that when leaving Switzerland one can either pay the capital withdrawal tax based on one’s residency in Switzerland (canton dependent URL) or withdraw after leaving Switzerland and then the tax rate depends where the pension fund is domiciled (e.g, Finpension in Schwyz which has one of the lowest capital withdrawal tax rates).

I was initially under the impression when leaving Switzerland the best option would be to pay the capital withdrawal tax rate in Switzerland and therefore avoid any tax abroad. However, it seems this is not the case?

Taking neighboring countries such as Italy, France, Germany, and Austria into account it seems the tax treaty appears the same (URL). If I understood it correctly the tax treaty with those countries would allow to reclaim the tax paid in Switzerland (Example) , however, it is then subject to tax in the new country which might be income tax of >40%.

Does anybody have experiences with this? I contacted also Finpension but, understandably so, they refer to the tax authorities of the new country which tax would need to be paid. I just find it confusing since I would already pay tax in Switzerland, why would I need to pay tax again in the new country of residency.

18

I find it is quite clear from the links you have posted (maybe re-read - I don’t mean this in a negative manner).

Have it paid out before leaving = taxed in CH, in your canton of residence, that is all.

Have it paid out after leaving = taxed in CH at rate of 3a provider “residence” AND foreign country you are registered in.
If it’s Germany, yes DTA results in crediting of tax paid to Switzerland, BUT big tax-bill from German taxman for this “foreign income”
Similar for many European countries, with exception of maybe Portugal, but that may have changed / is changing soon.

I believe the interesting examples are (for example Thailand on a retirement visa) where foreign “income” is not taxed, so you only pay the low Schwyz rate (if Finpension).
It really depends 100% on the foreign country you’re going to (and potentially under which kind of visa), and thus there’s probably 194 different outcomes.

3 Likes
19

I simplified it in my mind as follows:

  1. If I move to a European country outside UK I would probably withdraw the 2p & 3p before leaving Switzerland. For example by becoming self employed. Pay withdrawal tax in canton of residence (Geneva ~8%). Nothing to pay in destination country

  2. I move to the UK for a while. If I move assets to a fund in Schwyz beforehand I pay ~4.8% withholding tax and no tax in UK

20

It really depends for each country, for instance for France it can be like 7.5% + social contribution (which is fair considering it pays for health insurance).

21

How / when?

Having it paid out while still being resident in Switzerland is kind of a grey area IMO.

Leaving Switzerland needs to be definitive. Ans the Federal Social Insurance Office recommends possible proofs to be provided for that - many of which would require establishing residence in the new country first. Whereas you can (or may have to!) deregister from your Swiss municipality of residence already when embarking on a monthslong holiday/round-the-world trip.

22

Thanks for the answer. I have to admit even after reading it several times, I was still not sure if I understood it correctly. Particularly now also with your answer as well as the ones from nabalzbhf and San_Francisco.
Maybe it is just my interpretation but I feel there are some uncertainties which may cause either a 5 to 8% capital tax withdrawal rate in Switzerland or high income tax rate if I stick to my example of Switzerland’s neighboring countries alone. While even with an e.g., 40% tax rate I can still see how 3a+IBKR outperforms IBKR alone I have the feeling emigrating to Germany would not automatically lead to a low tax.

23

HI Everyone,

Raising a question on this topic rather than creating a new one. After 9 years working and living in Switzerland, I am moving back to a EU country for a new job. My plan is to split my pillar 2 into 2 different fundations at Finpension. However I am wondering how to do DCA investment rather than having the full amount invested on day 1. Can funds be transferred first into “compte libre de passage” and be invested with DCA approach?

I did not find anything on this so far.

Thanks for the valuable input.

24

Can’t you use a custom strategy and change it over time?

1 Like
25

As far as I know you have 1% in cash. The rest in your equity / bond / commodity funds selection or in money market fund. You can then keep moving money gradually from money market fund to the funds of your choice.

1 Like