Coming back to update this thread with what I finally decided to do, after consulting with a Spanish tax advisor specialising in non-residents, and some additional insights I got from that. Hopefully this will be useful to others that are planning a similar move in the future.
When I first wrote this post I wasn’t sure I was moving forward, but I am! A whole new life is opening ahead of me - I will continue working for my company from Spain for the next 6 months, and then… FIRE!
I finally decided not to withdraw my pension fund and leave it in Switzerland for the time being. I’m planning to open an account with ValuePension and leave the money invested in 100% shares (if anyone thinks this is a bad idea, please let me know!). This is because it was impractical for me at this time to move to another country temporarily, and it seems that the taxation in Spain would be extremely unfavourable (although continue reading for an additional avenue I might still explore). I don’t need the money for now, and I expect that in the future - as the children grow up - I will have more freedom to travel and move countries in order to optimise taxation.
Since I will be moving in August, I will have spent less than 6 months of 2021 in Spain and in 2021 I will be considered non-resident for taxation purposes. This is very important because Spain only considers tax residency for full years. Should I have moved in May, for example, I would have had to pay for the whole 2021 revenue at Spanish rates (much higher than the Swiss rates). Any money I will earn until the end of the year in Spain will be taxed at a flat 24% non-resident rate, and any money earned abroad will not be taxed. And this is the avenue I want to explore with my tax advisor on the pension fund: what happens if I withdraw the pension fund money while I’m still non-resident in Spain???
Finally, I learned about something called the “Beckham law” - named after David Beckham as it was made to make the country more attractive to international football players (what could be more important for the economic development of the country??!! ). This law applies to people that have had their fiscal residency outside of Spain for the prior ten years and that are coming to Spain on a contract with a Spanish entity. They can apply for non-resident taxation for up to 5 years, which is super-favourable for relatively high salaries. Non-resident taxation is a flat 24% rate, and only on Spanish revenue, instead of worldwide. Compare this with resident taxation that can go up to 47% on global revenue. Unfortunately this will not apply to me as I’m planning to stop working in 2022, but it could be useful to know for some of you whose companies might have offices in Spain: you could choose to move back 5 years earlier than initially planned and benefit from the tax treatment.
Not really a bad idea, but did you consider opening up a 2nd account somewhere else and split?
VIAC offers vested benefits accounts as well. I would probably wait to see if they expand their investment universe (as they’ve hinted at at least for pillar 3a in their recent app update) and consider splitting between two different providers. For diversification of risk and (possibly) tax advantages if you will be taxed at a progressive rate.
I would be very interested to hear the conclusion you reach on this.
Thank you for sharing the insights. It is reassuring as I also concluded that if we move to Spain then leaving the 2 & 3 pillar to grow in restricted accounts in CH and deferring the tax until later would be our probable approach seeing as competitive products now exist. I would also go for Valuepension for 2 pillar since they allow you to choose 99% shares and also they offer MSCI world quality, whilst for VIAC max shares is ~80%. Of course asset choice depends on one’s personal situation. As SF mentions it might also be handy to consider splitting into 2 accounts.
It seems possible to instruct the pension fund how to split between mandatory and non-mandatory parts:
„Sie können Ihrer bestehenden Pensionskasse mitteilen, wie der Betrag (sowohl insgesamt als auch die Verteilung obligatorischer / überobligatorischer Teil) auf die beiden Konten verteilt werden soll“
The question is: Will you be allowed to withdraw your mandatory pension benefits at all?
If you’ll be working (employed) in Spain, chances are you may be subject to mandatory occupational insurance in Spain - and would hence be prevented from withdrawing mandatory benefits due to the Swiss-EU social security agreement.
…this will, as I understand it, leave a very narrow timeframe, if any, to withdraw in 2021.
I assume the Spanish authorities will determine your social security status and communicate it to the Guarantee Fund in Berne only after three months after relocating - at the very earliest.
That would leave only a few weeks to withdraw this year - provided there’s no delay in the process (which is not a given).
Rather complicated if you intend to do it just for withdrawal of pension fund benefits - when you can just move to Portugal and be done with after a couple of months.
I think this is a valid option. Someone I know started a business coaching / offering advice. According to him withdrawing 2 pillar was easy he just needed to show 2 invoices, I can’t recall if he said he had to show a business plan too, and no questions were asked. This was 6 years ago he was an ex CEO (so credible). In his case the alternative was to be on chômage or social aid so this may have influenced the decision.
My understanding is the same: that OP would not be able to withdraw the mandatory part as she will be working in Spain, only the extra mandatory part. Another factor I thought of is that since claiming the mandatory part when moving requires notifying the Spanish authorities, if this is a “grey area” at all it may be a better strategy to just be happy withdrawing the extra mandatory part which is larger for most folks
I hadn’t thought of this. I will ask my current pension fund whether they are willing to split their payment into two accounts. Thanks for the suggestion!
Apologies for that sweeping generalisation, I did not mean to be arrogant. On reflection I realise that our employers have paid more than the minimum into 2 Pillar and my partner and I have made voluntary contributions in the past too. Which may not be the same for everyone, and is also why the tax impact would be material for us.
I also don’t want to portray myself as the low-earning underdog on this forum (that I am). But unless you have an executive position, made voluntary contributions or have one of a relatively few high-paying jobs, I think that for the majority of people the mandatory part make up the bulk of their pension fund benefits.
did you have 3rd pillar? I would be interested in finding out if the bank/fund was also strict when cashing out, only refunding it AFTER the move, and maybe only to a spanish bank account.
Just completed the withdrawal of the super-mandatory part of my Swiss pension fund pillar 2 from within the EU and paid only 0.93% tax on it. Find a description of the 18-months long process in a blog post (in German). I am now 56 years old and I am planning to either invest it or buy into a new pension fund again or do both after having returned back to Switzerland. Happy reading!
I know this must have been discussed previously on the forum, but I cannot find it. If already somewhere, thanks for sharing a link! My question is, what is the best country to be residing in order to minimize/eliminate taxes when moving out pillar 2a funds from Switzerland? Has anyone compiled an overview with what taxes you’d pay in Malta, Thailand, Mauritius, etc - and also specifically for pillar 2a? Also, does anyone have real-world experience doing this in a low/no tax geography?
This post & related thread has some info, I do not have personal experience however. When I did in the past leave Switzerland for some time abroad I simply paid the Swiss ‘tax at source’ and that was that. It never occurred to me that it would need to be declared at the destination country as well… The sums were small back then, I guess today there would be some questions from the destination country’s tax office.
in which your effective tax rate is appreciably lower than Schwyz’ tax rate at source and
that allows you take up residency.
Assuming of course, you want to do it the correct and legal way.
(Exceptions may apply to benefits from public employers, due to different rules in DTA)
Some countries with pillar 2 DTAs with Switzerland only tax foreign residents on income earned locally. Indonesia is one example. Thailand only taxes foreign income which is transferred into the country. Chile only taxes the local income of expats for the first 3 years of residence.
So there are ways, but you have to consider all aspects. It comes down to whether the Swiss withholding taxes you could reclaim are substantial enough to make a major move worth your while.
Thanks. Certainly I want to do this in a legal and correct way. In fact, as many DTAs exist, it is much more a puzzle about where you do noy pay tax on pillar 2a in the destination country, than recouping the Swiss tax - which as SF says - is very reasonable at around 5% in SZ.
If I do not need the funds, the alternative then is to move my pillar 2a into Finpension after my Swiss employment ends and simply leave the money in CH until retirement, regardless of where I may reside. Then you pay CH tax upon official retirement, of course, but just at 5%, correct?
By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, tu confirmes avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/
Durch das Lesen und die Teilnahme an diesem Forum bestätigst du, dass du den auf http://www.mustachianpost.com/de/ dargestellten Haftungsausschluss gelesen hast und damit einverstanden bist.
- I will continue working for my company from Spain for the next 6 months, and then… FIRE!
I didn’t take it as arrogant at all.
The challenge in answering the question, in my view becomes: