Sure you do.
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Sorry, that’s correct that you can make partial withdrawals to buy a home as well as when you divorce (to split/level out with your spouse). But you can’t make partial withdrawals when you become self-employed.
I suppose buying a primary residence in Switzerland before you leave is a way to withdraw at Swiss tax rates. AFAIK, once you move to a non-EU/EFTA country, the limitations on renting out or selling the property would fall away, since you are not longer under Swiss social security laws. I would need to find something concrete on that though.
Hi @Daniel, would be really interesting if you were able to find something concrete to confirm that this is how it works
To take an example, suppose one withdraws 2 Pillar to buy a house in canton Zurich and then later leaves Switzerland. Your pension fund is domiciled in Schwyz.
You have to pay the Zurich withdrawal tax when you buy the house. If you leave the country, an alternative argument could be that the house is no longer your primary residence and so you have to repay the money to a 2P or vested benefits fund , and reclaim the withdrawal tax from canton Zurich at the same time
The reason I was thinking this is because if you withdraw 2P due to no longer being a resident of CH, canton Schwyz would be entitled to a witholding tax. Wouldn’t the notary selling the house or updating mortgage have a duty to ensure Schwyz gets it cut (?)
Buying a house to cash out a second pillar and then move out of Switzerland seems a bit… too complicated. And I’m not sure how much it actually saves you because there are sizable transaction costs to buying and selling a house. I don’t know if Switzerland has deemed disposition rules as well but that might factor in on top of everything else.
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I hve done it. Withdrew the non-mandatory (voluntary or super-mandatory) part of my pension fund when residing in Luxembourg.
As I was working with an income, the tax man added the pension lump sum to the income to determine the tax bracket, which I then had to pay on the actual income (i.e. without the pension lump sum).
Not sure if all double-tax treaties are the same. For CH-Luxembourg, it follows the standard approach as highlighted by @Daniel
The high “unfavorable” tax rate is on income. If you have little or no income, it remains to be seen what they tax you. I only worked 7.5 months in the year I cashed the pension lump-sum out and expect to be taxed about 1.8% of the whole amount. Even though the overall tax rate on my income is over 40%!!
I pay 1.8% in Luxembourg and can get back 5% paid in SZ. Sounds like a good deal to me.
I propose to test the procedure in year 1 with relatively low pillar 3 amount and go for the pension (pillar 2) lump-sum in year 2. After all it is another country and there is not much room for errors.
My case might seem a bit specific but let me know if there are additional questions.
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Yep, the restrictions on selling the property is lifted once you withdraw in full (due to emigration or becoming self-employed).
No - because you already paid tax at the time of early withdrawal.
Agreed. I sometimes feel there’s a tendency to overoptimise and overcomplicate things a bit on this forum (quite the opposite from what I‘m seeing on Twitter or Facebook).
Eggzactly. The pension payout can be taxed as bona fide income in some countries! As it could easily reach into mid 6 figures territory it may subject you to batshit insane taxes like 40-50%. vs 5% in SZ.
Good to know but not everyone is so lucky. It’s highly country specific like i said
Just a bit north in Belgium you gonna pay 20+% to BE gov (i researched), and that’s already a special discounted pension rate. Ordinary income tax rate is closer to total nuts, ~50%, might even apply in rare cases. But yeah you get back those 5% from SZ…
Indeed that is an incredible deal. What was the process to get back the 5% - did you have to show the pension fund or SZ canton tax authorities proof that you moved to Luxembourg and had declared the payout? And did SZ pay back the full amount?
CH-LU Double Tax treaty says the pension is taxable in the country where you are resident - if LU apply 2% that is a great deal if you can also claim back the 5% Witholding Tax from Schwyz
Some other treaties are different. CH-UK DTA says lump pension payouts are only taxable in the state where the pension scheme is established. In your example if moving to UK instead of LU the only tax to pay would be 5% tax in Schwyz, no tax in UK. Therefore the Schwyz tax can’t be reclaimed but still a great deal
Indeed that is an incredible deal
Better deal: 0% as a non-dom resident in Malta. Just don’t let the money hit a maltese bank or it would constitute remittance and get taxed
Thailand’s not bad too iirc they also operate some kind of remittance based tax system
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Thanks. Any link or resource to share on that?
Thanks for the insult. I had a look and found this form for reclaiming Witholding tax on payments by Pension Funds Domiciled in Switzerland.
It requires the Malta tax authorities to confirm that the pension was remitted to Malta.
As far as I understand it, anywhere in the EU will only allow you to get back the extra amount (if you opted to pay extra beyond the legal minimum, nothing otherwise), but not the bulk of the second pillar (which amounts to over 20% of your all time salaried income while in CH + the puny interest).
I guess there are lots of different scenarios, for people earning more than 100k the non-mandatory can becomes fairly large quickly (the mandatory part only covers up to 86k).
(so it’s not a question of whether there was an extra buy-in or not)
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“ If you’re moving to an EU/EFTA country, generally only the supplementary portions of your pension assets can be withdrawn. If you are not subject to mandatory insurance in the country you are moving to, you can also withdraw the obligatory portion of your assets.”
UBS summary
Means that you may be able to withdraw the mandatory part in the EU too if you are not subject to social security. For example in UK, if you are not working you are not subject to social security so it was possible to withdraw the whole 2P (although uk is obviously no longer part of EU/EFTA)
You might want to replace or fix your keyboard, it looks like some of its keys are non functional.
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Interesting, so the mandatory part is only on 86k, but If you’re earning more, you’re also paying on the part above 86k which you’re allowed to withdraw then? I hadn’t realized that.
It also looks like we have kylin’s twin brother on the forum. 
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Yes, and only like 65k out of those 86k is covered. So if you earn 140k, already half is non-mandatory.
I wonder if there are any EU countries where you’re not subject to mandatory insurance when FIREd and drawing on investments. I also wonder what kind of insurance we’re talking about, is it state pension schemes?
Not necessarily / mandatorily.
…if the pension fund plan actually provides for non-mandatory contributions.
Pretty sure Portugal is one. I believe that even the unemployed aren’t subject to mandatory insurance there (at least when moving to PT from abroad).
I couldn’t tell or point to the law that does say so, so I can only provide anecdotal insight. But there are many Portuguese living in Switzerland. And most of them seem not subject to the insurance requirement upon moving to Portugal.
As opposed to France, for instance, where almost everyone seems to fall under the insurance requirement (though of course an early retiree is an exception in itself and possibly may not).
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