we are about to leave Switzerland permanently by the end of this year, I have some funds in 3a pillar (nothing extraordinary, around 40k). If I understood correctly leaving the country allows to withdraw these funds prematurely, however I was not able to find out what (if any) taxes are applied on such withdrawal by Swiss fiscal authorities?
Also, I am thinking if it’s worth to make contribution towards 3a pillar for this year and do the “rectification” next year (after we leave). Are there any special conditions for contribution which are withdrawn in short time span?
If you leave Switzerland you can withdraw all your pillar 3a assets without limitations. You will pay the capital withdrawal tax. If you withdraw while you are still registered in Switzerland, the tax will apply in your canton of residence. If you withdraw after leaving Switzerland, the tax will apply in the canton of the retirement foundation which holds your pillar 3a assets.
For 40k, the tax will be pretty low, as it’s a progressive tax. The capital withdrawal tax is just a fraction of standard income tax. You can expect to pay around 1500-2000 francs, give or take. This will be deducted before you get the money paid out.
You may also have to pay tax in your destination country, depending on the dual tax agreement. Regards contributing this year I doubt your cantonal tax authorities would let you claim a deduction at a high rate to then withdraw it at low rate in the same year
There is no limitation with regards to contributing and withdrawing in the same year. As long as you earn an OASI-elligible income, you can contribute to the pillar 3a. Withdrawals do not affect this.
As far as I know you can withdraw it, even the pillar 2, if you are not a EU member moving inside the EU.
For example if you are Russian you can withdraw or a Spanish moving to Canada.
If you do so I recommend to look for a tax optimization. I heard that moving your residence to Schwyz was the best option, but no idea
Pillar 3a assets can be withdrawn regardless of your nationality and which country you move to. The rules are different for the second pillar.
Tax optimization is only relevant if you are not moving to a country with a elevant double-taxation agreement with Switzerland. If you move to a country with a relevant DTA, you can reclaim the Swiss withholding tax by proving that you tax resident in that country.
If you move to a country which does not have a relevant DTA, then transferring your pillar 3a assets to a retirement foundation in a low-tax canton ahead of withdrawing them can be a good move. However, for 40,000 francs of pillar 3a assets, the tax differences may be negligible. Schwyz is generally the most favorable canton for all pillar 3a asset brackets.
An important consideration is whether your current pillar 3a foundation charges fees for transferring assets to a different foundation. Many do, and the fees may be so high as to nullify the tax advantage of transferring to a different canton. Some foundations charge fees for irregular withdrawals ahead of retirement age, so this is also important to look at.
You can find some of the fees charged on the detailed product information pages here:
Citizenship is irrelevant with respect to withdrawals upon moving to an EU/EFTA member state.
Non-mandatory benefits (from pillar 2 and pillar 3a) can be withdrawn if one leaves Switzerland for good.
Mandatory benefits (pillar 2, not pillar 3a, by definition) will remain locked in Switzerland as long as the person is subject to compulsory occupational insurance in the new EU/EFTA member state (or any other Swiss eligibility criteria for withdrawal are met, e.g. withdrawal for home ownership, death), irrespective of citizenship.
If the person subsequently ceases to be subject to compulsory insurance or moves to another non-EU/EFTA coubtry (Russia, Canada, Brazil), he or she will become eligible for withdrawal.
You will likely be able to pull it off, though you will lying to the government (and the pension fund/vested benefits institution).
PS: I suppose they might (and will only) come after you if you‘re later applying for welfare or use your move for abusive tax „optimisation“ (i.e. voluntary contributions to your pension fund and corresponding tax deductions in later years).
One question. Assuming I move to an EU country, I can withdraw the funds from 3a, which will pay capital withdrawal tax, as mentioned, before I get paid.
I was told by my accountant that I do not have any tax responsibility regarding those funds/profits in the new EU country I move to. He said that I’d be paying the relevant taxes in Switzerland (capital withdrawal), and then I’m basically transferring funds from one country to the other, and hence there would be no taxes to be paid. Is that correct?
If it is correct, then there would be no incentive to use the DTA, unless the new country I move to charges lower capital withdrawal taxes, right?
If you’re able to withdraw the funds while still being a Swiss tax resident, I think that’s correct. However, it’s unclear to me whether that’s possible (I suspect it’s not possible but may depend on various circumstances). If your tax residency is already in the destination country when withdrawing funds, it depends on the country and DTA, as has already been mentioned.
It should definitely be possible if you’re already 60, in which case you can withdraw the funds in Switzerland before the move. However, I guess you’re younger than that.
Jay explained it well. If you are eligible to withdraw your pillar 3a while still a tax resident of Switzerland, then the Swiss retirement capital withdrawal tax will apply. That could be the case if you are eligible for an early withdrawal for real estate or self-employment, or if you are at least 60 years old.
If you are withdrawing on account of leaving Switzerland, you will generally be subject to taxation in your new country of residence at the time you withdraw. Some Swiss retirement foundations (including the one used by VIAC) require you to show proof of tax residence in another country before you can withdraw pillar 3a assets. Others do not have this requirement (foundations are only legally required to ascertain that you have given up residence in Switzerland). In any case, the Swiss withholding tax will be deducted. If you want to reclaim it you will have to show proof of tax residence in another country.
It’s possible that the country you are moving to has a favorable DTA that allows the withdrawal to be taxed in Switzerland only. AFAIK that is not the case with any EU country, but I could be wrong. If it is the case, then maybe that is what your accountant meant. Should that be the case, you will want to make sure your pillar 3a savings are in a canton with favorable withholding tax rates to minimize the tax burden.
Yes. The UK is favorable in that regard. But I don’t know of any EU country that has a similar DTA. To my knowledge this is governed by an agreement between Switzerland and the collective EU, and a similar agreement with EFTA.
Of course, there’s a (very small) chance that in some EU countries, depending on your situaton and the exemptions/deductions you can claim, your income tax on that money could be lower than the lowest Swiss withholding tax. Unlikely, but I wouldn’t completely rule it out.
Most places in the EU you need to spend at least 6 months there to be considered a tax resident. If you move towards the end of the year, even if you receive the 3a funds while technically a new resident of such EU country, I don’t think they can tax it? Especially if you already paid the canton withdrawal tax.
To my knowledge it works a little differently. You become a tax resident as soon as you register as a resident. Only if you do not voluntarily register as a resident are you automatically classified as a tax resident after you stay in the country for 6 months.
Likewise, you are not considered a tax resident of Switzerland once you have deregistered to take up resident in another country. You also automatically lose your tax residence in Switzerland after you have stopped living in a Swiss municipality for a certain amount of time. The limits vary between municipalities.
Having moved between countries that’s not how it typically works, you don’t have a “blank” period, once you settled elsewhere long term you become a tax resident.
(I moved to a country in December, I had to file and pay taxes for that year)
Each country has its own definition of tax residence, yet:
you will usually be considered tax-resident in the country where you spend more than 6 months a year
you will normally remain tax-resident in your home country if you spendless than 6 months a year in another EU country.
I know someone who moved from Italy to CH in August: he paid taxes in Italy for all income received until Aug; and paid taxes in CH for the income received between Aug-Dec.
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