Would withdrawing while still registered in Switzerland be really that punishing?
To put things into perspective, Schwyz the canton is always advertised as the “ideal” Stiftungssitz if planning to withdraw from abroad - but most Stiftungen are actually based in Schwyz the town (rather than e.g. Wollerau) where the communal part of the tax charge is rather high.
Edit: this applies to residents only, for non-residents see my post below.
You’d need to use it because you’re reaching retirement, are creating your own company, or for a real estate purchase.
I don’t think you can say you want to withdraw because you’re moving abroad in the future (for that you need to have moved abroad already).
I was assuming BigVern has reached ‘regular withdrawal age’ already, although not explicitly stated.
Thanks EPeon. I understand that I cannot withdraw the pension lump sum until I de-register in Switzerland.
I also understand that Spain will class the pension lump sum as ‘‘earnings’’ if I register for tax in Spain before I transfer the money to a Spanish bank account, and therefore I would expect to be hit with a big (around 50%) tax bill in addition to the withholding tax already paid in Switzerland.
So my first question was could the Spanish authorities get tax on the pension lump sum if I did the following?
I de-register in Switzerland on say, 1 August (& spend the rest of the month touring CH)
I transfer the pension lump sum to my Spanish bank account on say, 15 August
I arrive in Spain on 1 September and registered for tax there
Thanks nabalzbhf
I’m 58, so could only withdraw the non-BVG amount (if I understand correctly)
The tax calculator you linked to is for residents of Schwyz (canton).
The reputation as a „Stiftungssitz“ comes from its low rates applied at source to non-residents.
These rates are not the same.
You‘d have a gap of one month of having no tax residency anywhere.
Could a Spanish tax office argue that you were already tax resident there, just „late in registering“. I‘ve got little doubt about that (especially considering that Spain - like many other countries - charges capital gains tax). The potential for abuse is to obvious and great. As you say: the amount may raise suspicion.
Would they actually do it in your case? No idea. Depends on how keen they are on looking into it and enforcing the supposition that you must have tax residency somewhere, I guess.
…depending on your social security status in the new country.
But you‘ll be unable to prove you’re not subject to compulsory insurance (and thus eligible for withdrawal of the BVG amount) within one month of deregistering.
You are correct, the commune doesn’t appear to get a share if withdrawal occurs from abroad. For anyone interested, here are the Schwyz actual tax-at-source rates.
Thanks for posting the link (I meant to do it in my post above - but it didn’t work).
Not only that - if I’m not mistaken, the canton also applies its tax multiplier (120% for 2023) to residents. Whereas only the base rate is charged to non-residents at source.
Can I ask you all how much money are we talking about? I think sometimes it’s not worth wasting our time to optimize that much, especially since it’s a tax and not money spent to a private company. I like to think that taxes are spent for the good, for me and for every person around me.
(This reminds me how much I don’t like the swiss system where everyone prefer to pay banks indefinitely with their mortgage instead of paying taxes)
For me it is almost 20 years of pension scheme payments running into several hundred thousand Swiss francs. Being taxed in CH is one thing and fair enough, but being (double) taxed again at rates approaching 50% when this lump sum is repatriated to another country is both unreasonable and unfair (in my opinion).
Quite sure you will not be double taxed. You will either receive tax credit in Spain for the foreign withholding tax - or a refund of the Swiss withholding tax from the Swiss tax administration.
Paying taxes on your paid-out pension benefits seems reasonable and fair - since they (are basically income or a replacement for income and) have not been taxed yet.
Paying taxes where you live and are tax-resident) also seems reasonable and fair.
Still getting taxed 50% ! Is completely insane. It‘s literally stealing money from you, as it‘s afaik on the whole amount and not only the capital gains in that case. It‘s stealing money you paid in.
In Switzerland, you pay a tax rate on lump-sum payout that’s comparable to receiving the amount paid in monthly pension “installments” (the Schwyz tax code that I briefly skimmed through this morning explicitly refers to this method of calculating: it’s taxed at the same rate as 1/25 the amount received yearly would be taxed). Reasonable and fair.
The obvious issue is that some countries’ tax systems use progressive tax rates - yet don’t really account for lump-sum payouts of compulsory pension benefits (probably because the country itself does not have such lump-sum payout domestically) by reducing the progression in the tax rate. On something that would „normally“ be paid in monthly pension.
Or, conversely, that Swiss law does not give retirees the right to receive a monthly pension from their compulsory 2nd benefits - unless they retire from their Swiss job and pension fund, i.e. work there until retirement (unless you maintain 2nd pillar insurance on a voluntary basis - though this can be very expensive). And that’s also an issue the unemployed in Switzerland face (and divorcees used to until recently), albeit from an income, not much a tax perspective.
Apparently the Swiss take their withholding tax when they pay out the pension lump sum, & the Spanish will then tax the balance at their progressive rates (unless I can find a workaround). There is the option to apply for reimbursement of the Swiss withholding tax, but this is only after paying both sets of taxes, and from what I have read on other forums this is difficult and can take a long time.
As the UK is no longer part of the EU/EFTA they have a different agreement with the Swiss, which is that for UK residents transferring pension lump sums to the UK, only tax in Switzerland is payable. Since I’m a UK citizen, becoming UK resident for a short period of time would be a possibility to avoid double taxation. However, this would mean, I guess, having to spend at least 183 days of the next year on that little dreary island 
Withholding tax isn‘t final (…unless it is, of course, i.e the foreign country doesn’t tax it or there’s no DTA). Having tax deducted at source doesn’t mean you’re taxed double, just as your tax prepayments or taxes withheld on dividends don’t mean it).
Somebody on the forum has done and explained it - and it does not seem that hard.
Of course they want proof that it was taxed abroad.
Given that you’re 58 already, you could stay in CH and withdraw your benefits in full at 60 years.
It is very variable depending on pension pot size, canton, marginal tax rate (if resident). For me, it worked out at around 360k in capital taxes.
three hundred sixty thousand swiss francs in taxes? You should have had a huge 2nd pillar. What did you have a monthly wage of 60k chf?
Thanks for the link - in this example paying taxes from CH to Luxembourg & claiming back the CH withholding tax seemed pretty straightforward, and it seems Luxembourg has a much more reasonable approach to taxing pension lump sums than most countries.
Your second point is interesting, stay in CH until 60 & then withdraw the benefits in full. Given the prohibitive tax situation in most EU/EFTA countries this might be worth considering. I am assuming from your suggestion, that at 60, if I withdrew the pension (in CH) in full and then relocated to Spain & transferred the money there that this would not attract Spanish tax?
Most of the countries in Early retirement, move to another country and pension fund withdrawal (pillar 2 and 3) - #102 by EPeon have pretty low taxes no? (5-10%)
Well that might be a „positive list‘ and even for those countries some conditions are attached to get that favorable tax treatment instead of the default rate - still worth serious consideration.