Advanced withdrawal from vested benefits account to purchase property in the EU

Investing / Others
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Dear all,

Firstly, thanks for the great forum where I could find lots of useful information!

I’m opening a new topic because I wasn’t able to find an answer and believe others in my situation could benefit from it.

Context:

  • Lived in Switzerland for a few years and left to work and live in an EU country (Belgium).
  • After leaving, I moved my 2nd pillar pension contributions to a vested benefits foundation (finpension – 1 account that encompasses both the mandatory and extra-mandatory part).
  • We now want to buy a house in Belgium and would like to use (some of) the money from the 2nd pillar to buy a property that will be our main residence. This is possible and regulated under the advance withdrawal scheme.

My question:

  • Does anyone have experience with the tax implications of an advanced/early withdrawal (WEF) in an EU country? Any experience from Belgium would be particularly useful. The legislation only seems to cover lump-sum cash pension payments at or close to retirement age (I am far from retirement age).
  • A phone conversation with the tax authorities mentioned that this is not a taxable event nor needs to be declared in Belgium. I asked for a written confirmation, but no response yet. Given the potential tax on such a transaction, I want to be cautious and know the tax implications beforehand, which is why I’m hoping to find someone here with a similar situation.

Thanks in advance!

2

I do not have personal experience but the Swiss-Belgium Double tax agreement Article 18 (see * below) implies it would only be taxable only in Switzerland.

If you are no longer resident in CH, I believe this means you would only have to pay the withdrawal tax of the canton of domicile of your vested benefit provider Finpension (which is Schwyz and has the lowest rate).

Perhaps you can contact Finpension to confirm this is what they would apply on their side. On the Belgian side, if you want a 2nd opinion perhaps you can consult a tax advisor (show them the DTA and ask for confirmation to minimise the amount of time they spend researching it…)

=========

(*) English translation:

"Art. 18 Pensions
§ 1 Pensions and other similar remuneration arising in a Contracting State and paid to a resident of the other Contracting State in respect of past employment may be taxed in the first-mentioned State.

§ 2 For the purposes of paragraph 1, pensions and other similar remuneration arise in a Contracting State:

a) to the extent that contributions to a pension scheme or provident institution have given rise to tax relief in that State, or

b) when they are paid by a State or one of its political subdivisions or local authorities, either directly or out of funds constituted by them, in respect of services rendered to that State or political subdivision or local authority."

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I recently had a very similar discussion on this post: Withdrawing 3a pillar when leaving Switzerland - #27 by Patirou

My tax advisor told me the same thing: we have to pay withdrawal taxes in Switzerland, which are low and optimized for Finpension, and then we’d only be doing a money transfer from Switzerland to Belgium and therefore there would be no tax applied to such a transfer. It’s just a transfer, it’s not a taxable event.

But same as you, I still find it hard to believe :slight_smile: Anyways, I’d be very interested in getting your feedback from that experience! I myself am planning to not work for 3 months after leaving Switzerland so that I can withdraw the entire pillar 2. Nevertheless, if I can’t for some reason, I will do the same as you: move it to a vested account and use it as possible.

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I have seen multiple people online confirming it works like this when moving to UK. I do not know anyone having done it for Belgium

Your case was Portugal, I read that pension lump sums used to be tax exempt until other EU countries complained and now it is 10%

For example this article

" Portugal: Pension treatment under non-habitual residence (NHR)
If you registered as a non-habitual resident before 31 March 2020, foreign source pension income is generally tax-free.
If you registered from April 2020 until the scheme closed to new applicants, your foreign pension income is generally taxed at 10%"

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