Kapitalleisungssteuer of your canton+municipality you’re still resident in Swizerland, or a special cantonal Quellensteuer of your pension fund’s canton if not. Note they have different rates. For the latter, Schwyz is the cheapest, but you’re gonna pay $$$($) to park and withdraw the money at all schwyz establishments, whereas at non-SZ funds it’s usually free.
Depends, potentially both.
Depends, but probably that’d be the least effective thing to do as you will get taxed by your residency canton+municipality. Are you willing to temporarily move to boondocks to optimize the taxes?
Applies to both
You thought wrong. Yeah in principle you’re not supposed to have two pillar two account, if you change jobs you should transfer the balance of old fund to the new fund, but then again people are lazy and do end up with multiple accounts often enough. There’s no enforcement/punishments for this.
Depends. I’m not 100% sure but I think Quellensteuer is per withdrawal case/account (so 5+5) and Kapitalleistungssteuer is generally per tax(=calendar in CH) year (so, 10 at once). But with pillar 2 you can ask for partial withdrawal and spread it over multiple withdrawals/years, also transfer balance of one account into another etc
The latter
Most EU countries are gonna tax your pension fund payout, potentially at highly unfavorable tax rates, if you withdraw as an EU resident… On the bright side you should normally get swiss Quellensteuer refunded in such cases, thus your main worry should be how your EU country is gonna treat and tax foreign pension fund payouts.
Maybe make plans for a holiday in neutral third country after leaving CH so that you would only have to pay the relatively low swiss tax, around 5% in SZ (unless we’re talking about 7+ figure acc’s). Watch out for some barbaric countries (France IIRC) that might want to disregard such holidays and tax you from the day you left CH rather than from arrival and actual residency as is usually the case in civilized world
Partial transfers are not possible. When you leave your pension fund (i.e. leaving and employer or leaving the country) you can have the pension fund transfer your benefits to up to 2 vested benefits foundations. Your benefits will then be divided into two accounts/funds/etc for as long as they are vested.
Vested benefits accounts always have to be cashed out in full. You cannot make partial withdrawals or trasnfers (the only exception applies to divorce). So if you want to move benefits to a different vested benefits solution, you have to close the old account and transfer the full amount to the new one. If you want to withdraw, you have to close the account and cash out the full amount in one go.
That’s why you have the option of splitting between 2 foundations. So that you can withdraw in 2 different tax years to avoid high tax brackets.
In theory. In practice my bank couple years ago had zero problems making a partial withdraw from even pillar 3 (for mortgage amortization), even though everyone says it’s unpossible, well but my bank statements say otherwise
Anyway, a staggered withdrawal is unlikely to make financial sense anyway, too much hassle and fees. Get it right the first time and be done with it.
Partial pillar 3a withdraw is not an issue when the withdrawal reason is your residential property. However, it’s not possible for other withdrawal situations (self-employment, retirement age, emigration), as far as I know.
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.
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.
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
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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