Hmm… that seems convincing. And then whatever amount I have generated I will get it from retirement age until I die?
And the amount is increased only by what it generates if you put it in VIAC or similar or the government adjusts the inflation also? Because I will still have to wait 25 or 35 yrs for the retirement (depending if they keep increasing the age).
I am bumping this thread since I thought it might be the best thread discussing the tax consequences on the 2nd and 3rd pillar after leaving Switzerland.
I am currently debating if I should diversify my portfolio by investing in the 3a pillar. I am aware of the tax benefits (tax reduction based on marginal tax rate, no tax on dividends, and no wealth tax), however, I am slightly concerned about what would happen if I emigrate before retirement.
I read here that when leaving Switzerland one can either pay the capital withdrawal tax based on one’s residency in Switzerland (canton dependent URL) or withdraw after leaving Switzerland and then the tax rate depends where the pension fund is domiciled (e.g, Finpension in Schwyz which has one of the lowest capital withdrawal tax rates).
I was initially under the impression when leaving Switzerland the best option would be to pay the capital withdrawal tax rate in Switzerland and therefore avoid any tax abroad. However, it seems this is not the case?
Taking neighboring countries such as Italy, France, Germany, and Austria into account it seems the tax treaty appears the same (URL). If I understood it correctly the tax treaty with those countries would allow to reclaim the tax paid in Switzerland (Example) , however, it is then subject to tax in the new country which might be income tax of >40%.
Does anybody have experiences with this? I contacted also Finpension but, understandably so, they refer to the tax authorities of the new country which tax would need to be paid. I just find it confusing since I would already pay tax in Switzerland, why would I need to pay tax again in the new country of residency.
I find it is quite clear from the links you have posted (maybe re-read - I don’t mean this in a negative manner).
Have it paid out before leaving = taxed in CH, in your canton of residence, that is all.
Have it paid out after leaving = taxed in CH at rate of 3a provider “residence” AND foreign country you are registered in.
If it’s Germany, yes DTA results in crediting of tax paid to Switzerland, BUT big tax-bill from German taxman for this “foreign income”
Similar for many European countries, with exception of maybe Portugal, but that may have changed / is changing soon.
I believe the interesting examples are (for example Thailand on a retirement visa) where foreign “income” is not taxed, so you only pay the low Schwyz rate (if Finpension).
It really depends 100% on the foreign country you’re going to (and potentially under which kind of visa), and thus there’s probably 194 different outcomes.
I simplified it in my mind as follows:
If I move to a European country outside UK I would probably withdraw the 2p & 3p before leaving Switzerland. For example by becoming self employed. Pay withdrawal tax in canton of residence (Geneva ~8%). Nothing to pay in destination country
I move to the UK for a while. If I move assets to a fund in Schwyz beforehand I pay ~4.8% withholding tax and no tax in UK
It really depends for each country, for instance for France it can be like 7.5% + social contribution (which is fair considering it pays for health insurance).
How / when?
Having it paid out while still being resident in Switzerland is kind of a grey area IMO.
Leaving Switzerland needs to be definitive. Ans the Federal Social Insurance Office recommends possible proofs to be provided for that - many of which would require establishing residence in the new country first. Whereas you can (or may have to!) deregister from your Swiss municipality of residence already when embarking on a monthslong holiday/round-the-world trip.
Thanks for the answer. I have to admit even after reading it several times, I was still not sure if I understood it correctly. Particularly now also with your answer as well as the ones from nabalzbhf and San_Francisco.
Maybe it is just my interpretation but I feel there are some uncertainties which may cause either a 5 to 8% capital tax withdrawal rate in Switzerland or high income tax rate if I stick to my example of Switzerland’s neighboring countries alone. While even with an e.g., 40% tax rate I can still see how 3a+IBKR outperforms IBKR alone I have the feeling emigrating to Germany would not automatically lead to a low tax.
English forum website was shut down and the link no longer works. I can no longer edit the post above. Here is the way back machine link to the archived page:
Hi Raisa! Would you be so kind to share the info on Belgium? I recently moved there from Switzerland and would like to understand the tax implications of a potential early withdrawal from the vested benefits foundation. I would use the money as a deposit for a primary residence. Thanks.
I’m also interested in understanding the most tax efficient options.
Move first to a country where 2 & 3 pillar withdrawals are not taxable.
FWIW UK still doesn’t tax these (source). Swiss withdrawal tax is due but it’s 2-10%.
Leave employment and become independent before leaving CH which allows you to withdraw pension. Pay taxes but at a reduced rate depending on the Canton of residence
Same 2-10% withdrawal tax as option 1.
Does this seem about right?
Not quite. It is not the withdrawal tax that is due in this case, it is a witholding tax (WHT). Pretty sure the rates are different thought I have not cross-checked.
But most importantly, the WHT rate depends on the canton where the 2/3p provider is domiciled and not the canton where you were resident before you left. Schwyz has lowest WHT rate so it is common to move your pension a provider domiciled there before leaving.
Indeed that’s correct.
If you withdraw your benefits while you are still living in Switzerland, then you pay the capital withdrawal tax of the canton in which you live. Where the vested benefits foundation is located is not important, in this case. The amount of tax you pay is determined by where you live. Normally, this would only be the case if you withdraw to buy a home or become self-employed.
If you withdraw benefits after you leave Switzerland, then a withholding tax is deducted by your Swiss vested benefits foundation before the money is paid out. Withholding taxes for vested benefits can differ from capital withdrawal taxes for vested benefits. The canton of Schwyz has the lowest withholding tax, with a maximum rate of 4.8%.
If you are moving to a country which has a relevant bilateral social tax agreement with Switzerland, then you can reclaim the Swiss withholding tax by submitting proof that you have tax residence in another country. In that case, the amount of withholding tax you pay is not as important, because you can reclaim it.
Example: assuming 250k in Pillar 2. Becoming self-employed will result in 4.6% Schwyz withdrawal tax with Finpension. Meanwhile moving to the UK will result in 4.8% Schwyz withholding tax.
Be careful there. The mere existence of a DTA is not enough to say that the witholding tax can be reclaimed. It depends which country gets assigned the right of taxation as per the DTA… If it happens to be CH then the withholding tax won’t be reclaimable (but that is usually desirable, given the low tax rate of WHT in CH).
Check out this map to know where the WHT is reclaimable, or not.
No, it cannot be claimed back!
Try here 
UK tax on Swiss pension withdrawal - Finance, Taxes, Banking, Insurance and Retirement - Swiss Forum
I checked the article you shared but didn’t understand why UK claim back isn’t possible, do you want to clarify?’
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Attention: The existence of a double taxation agreement is not a guarantee that you can reclaim the withholding tax. Switzerland has signed a double taxation agreement with countries such as Denmark, Great Britain, Iceland, Canada, Sweden and South Africa –and yet Swiss abroad cannot reclaim the withholding tax deducted on their pension fund assets. In tax jargon, this means that the tax law in question is assigned to Switzerland.
What applies to the second pillar does not have to apply to pillar 3 a. Anyone who emigrates to Thailand will have their withholding tax refunded on their pension fund balance; but not on the Pillar 3a balance. This also applies to Argentina, Mexico or New Zealand.
Exactly this. A Double Tax Agreement (DTA) or Double Tax Treaty (DTT) is designed to prevent people (or companies) from being taxed twice. By reducing double taxation, those agreements help overcome the obstacles for cross-border economic transactions which is usually beneficial to both countries.
In practice, what’s written in a DTA/DTT is what gets taxed where, and this is the result of negotiations between the two parties (i.e. countries). Thus, no two DTAs are the same.
In the specific case between the UK and CH, they have decided that lump-sum benefits of pensions will be taxed where they are withdrawn (as written in art. 18.2 of the DTA).
I see you haven’t been on the forum for years but quoting anyway, I reached the same conclusion unfortunately. I expect a big tax bite to come off the 2nd pillar when I eventually get there, but don’t worry about it as the 2nd pillar is even less liquid than the 3a, and with far lower expected returns.
The process one should follow would be to estimate:
In a break even scenario then the 3a has no benefit for me. Need to run some scenarios with higher and lower annual gains
There’re of course the options to buy a house in CH (zero interest), going freelance (hassle), and playing with the tax and residency calendars ex-CH to fly under the radar (not for me!).
There is also the option recommended by some tax consultants:
''In the first step, the assets are transferred from the pension fund to a so-called vested benefits foundation in the canton of Schwyz. The mistake that most expats make is that when they leave Switzerland, they deregister directly from their old place of residence and re-register in the new country.
In contrast, consultants recommend waiting about a month before re-registering. During this period, during which the person moving can continue to live in Switzerland as a tourist, the pension capital is transferred back to their home country. When they subsequently register at their new tax domicile, the increase in assets in their bank account has already taken place. ‘’
This is what I have done - it took 13 working days to transfer my pillar 2 (and 3a) funds from the Schwyz vested accounts to my Spanish bank. I checked with a Spanish tax lawyer (and the vested accounts provider in Switzerland) prior to the transfer and they advised:
Now, if the local tax authorities were interested then they could obviously challenge this and I will have to cross that bridge if/when it comes to it, but it seems as if this approach is not unusual.
I’m not sure how this meshes with:
It relies on passing under the radar 
(and yes it’s likely to work in practice, everyone makes their own risk assessment).
I admit it does seem a bit contradictory, but what I meant is that even if it doesn’t pass under the radar and comes to the attention of the Spanish tax authorities they can only try and argue that I should have been tax resident in Spain at the time of the transfer.
As per the article the Danish honorary Danish consul in Zurich, states «The contradictory logic of the tax systems means that those affected fall between the cracks. Although it often involves several hundred thousand francs, those affected rarely receive any reliable information on how to avoid these pitfalls.»