Do check and confirm with your current pension fund. They may allow early retirement from the age of 58 (regardless of where you live).
Also, keep in mind that - at least some - municipal tax administrations will allow you to file and pay tax on your lump-sum payment while still being a resident - even in cases of impending emigration.
As in: „I‘ll be moving away to another country for good in a few weeks. I have already notified your colleagues at the Einwohnerkontrolle. Could I already get a tax bill for my lump sum X to be received from my pension fund/vesting account - and could you also give me a confirmation that it was taxed already, so the pension fund/vesting account foundation does not have to withhold tax at source?“
Also seems and sounds like a bit of a grey area if not loophole? Indeed it does - but in this case it’s „sanctioned“ by your local tax authority. “I received a pension fund payout while being tax resident in Switzerland as provable by my certificate of deregistration and also the tax bill from my municipality for that particular payout” sounds much saner to me than “I was so clever to be a tax resident nowhere in the world for these four weeks last April, during which I happened to receive my pension fund payout.” If someone were to probe into it (albeit that may not be all that likely, see the NZZ article linked previously).
The foundation paying out your funds has to play along, obviously. And you‘ll be paying resident rates where you live - instead of non-resident rates at source in (presumably) Schwyz or wherever your pension fund is located. Also, you may be limited to withdrawing only the noncompulsory part of your benefits - with the compulsory part only payable out to you later, when you’ll be resident in Spain.
While I neither offer professional tax advice nor say I‘m familiar with the Spanish tax code or DTA, that’s what would assume, yes: There should be a deadline up to which you’re considered tax-resident in Switzerland and from which you are in Spain. And if you withdraw before that cut-off, only Switzerland will have the right to tax.
Thanks a lot for your advice. I will certainly check with my pension fund & arrange to speak to a Swiss accountant to find out if I can withdraw and pay tax on my pension lump sum payment whilst remaining resident in CH. I will keep everyone in this thread informed of the outcome
Pillar 2 was only around 500k at the start of last year, but I plan to increase that to around 1.8M over the next few years through aggressive voluntary contributions to shift my portfolio from taxable accounts to non-taxable in the run up to early retirement.
Then I will withdraw it into a vested benefits account and per my model, this will grow to just shy of 4M at the time of withdrawal at retirement age.
Exactly, it is a total limit (ignoring special additional limits if you’ve been in CH for less than 5 years) so if you arrived age 50, you’d have a load of back years potentially to fill in.
You’re essentially limited by number of backfill years and salary. In practice, you’re also limited by your capital withdrawal tax rate as you could end up paying more tax if your tax savings are less than the capital taxes due at withdrawal.
And having just looked at marginal tax rates (why did I not do this much earlier?!) I wish I’d started contributing to the pension fund earlier - at least to reduce taxable salary below 150k, which is the level that 13% marginal rate for Bundesteuer kicks in for families.
Quick update on the worst case scenario: I checked with a tax lawyer in Spain who explained that pension lump sums are not taxed as income, rather as ‘‘capital income’’ which attracts capital gains tax at the appropriate rate. This is significantly lower than the normal progressive income tax rates.
I will be checking soon with a Swiss tax advisor to check out the viability of the suggestions of NZZ & San_Francisco - will update when I get more information.
Was he / she referring to “renta del ahorro” tax category and tax rates 19- 28% ? link
If so it would confirm it is cheaper to withdraw whilst still a swiss resident - by becoming self employed, for example. Added benefit you can withdraw the mandatory part with fewer restrictions
@mars is it possible to ask you what you decided to do in the end, or what are the final considerations you are examining to make a decision? Also, I had understood that one had to genuinely use the withdrawn money for self-employment purposes and not simply use the self-employment justification to withdraw pillar 2 without having any use of the money into the business?
“Maximaler Steuersatz” may be misunderstood. My own experience from withdrawing CH pension fund capital as a resident of Luxembourg has been better:
Thanks to double taxation treaty CH-LUX, it was clear that taxation is done fully by LUX. Hence I got all CH-Quellensteuer back and it did’nt matter from which canton it was originally levied.
LUX counted this capital as foreign earned income and put me into a near maximal tax bracket (so called global tax rate). This was then applied to my locally earned income. As I didn’t earn a full salary, the resulting tax on pension fund capital was very benign.
Sounds like Luxembourg doesn’t tax foreign ‚income‘ (capital withdrawal) but merely applies a Progressionsvorbehalt.
Some of the other countries mentioned are however taxing the actual withdrawal as if it were income, possibly with some relief if you ask for it. From the link above:
Indeed, these are the relevant questions here (cumulative!). Sorely missing a reliable source of info on question 2: hard facts on tax rates for your pension benefits in your new country lower than Schwyz. All I’ve read so far is pretty vague (“country X is good” etc.)
@nabalzbhf : you proposed looking at OECD material, but I haven’t found anything on taxation of pension benefits unfortunately.
I did check with a Spanish tax lawyer who was quite clear that any funds transferred to Spain before registering for tax residency there would not be taxed by the Spanish authorities. He also stated that there is no specific requirement to register for tax on the day of entry into Spain, and that this could be done anytime in the first few weeks of arrival. I’m guessing this reflects a more pragmatic approach to such matters when compared to say Switzerland, Germany or Austria.
I will be taking a six week vacation when I de-register in Switzerland, and plan to transfer funds (paying the Swiss withholding tax)to Spain and pay the Swiss tax during this period and before my arrival in Spain.
It was mentioned elsewhere in the forum: even if you have deregistered from Switzerland, if you have not yet become tax resident in another country then you remain a swiss tax resident. Switzerland doesn’t let you become stateless for tax purposes.
A separate question is whether the swiss tax authorities will find out
That’s interesting, although in my case this could actually work in my favor. Is this rule documented anywhere or is this just from individual’s experience?
It was discussed and the law quoted in this thread
Why would it work in your favour? For example, I don’t think it would wash with the Spanish authorities if you have moved , but you claim you are still tax resident in Switzerland on account of having delayed your registration
In terms of working in my favour - by the time I arrive in Spain I will have spent >183 days pro rata this year in Switzerland (although it seems the bar for tax residency in CH is set much lower), plus I will have transferred my wealth to Spain (& paid Swiss withholding tax) before registering for tax residency in Spain. In addition I will still have to submit my 2024 Swiss tax return and pay Swiss taxes. Therefore, the added ‘‘if you have not yet become tax resident in another country then you remain a swiss tax resident’’, would appear to close the loop on a potential claim that the wealth transferred to Spain in advance of tax registration should also be taxed in Spain.
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