Tax Optimisation - Pillar 2a and 2b
Depending on the size of your pension fund assets, tax savings of over 50% can be achieved!
General Rules
Moving to EU / EFTA countries
Austria, Belgium, Bulgaria, Croatia, Czech Republic, Cyprus, Denmark, Estonia, Finnland, France, Germany, Greece, Hungary, Holland, Ireland, Iceland, Italy, Latvia, Lithuania, Luxembourg, Malta, Norway, Poland, Portugal, Rumania, Slovakia, Slovenia, Spain, Sweden.
Mandatory Benefits
Can only be withdrawn if you are no longer subject to the social security obligations of your target country i.e. if you no longer make contributions to the local pension scheme.
If mandatory benefits can not be withdrawn, they have to be transferred from your company pension fund to a vested benefit account in Switzerland.
Extra-Mandatory Benefits
No restrictions on lump sum withdrawals.
All other countries
Both mandatory and extra-mandatory benefits can be withdrawn as a lump sum.
Tax on lump sum withdrawals
Withholding tax is levied by the canton in which the relevant pension fund / vested benefits foundation is based.
The lump sum is usually taxable at the new place of residence.
Swiss withholding tax is refundable within 3 years when a DTA is in place.
Switzerland has double tax agreements with approx. 100 countries:
In which case, withholding tax is refundable
In some countries despite the DTA, withholding tax is not refundable e.g. UK, Canada, South Africa
Remark: Withholding tax is not refundable for civil servants but they are exempt from tax on pension capital in the target country.
Withholding tax rates
The following table highlights the tax levied on lump sum payments by Swiss cantons for single and married couples.
How much tax can be saved?
Depending on the size of your pension fund assets, tax savings of over 50% can be achieved!
Example: Moving permanently to the UK
Remarks
UK assign the taxation right exclusively to Switzerland.
Swiss withholding tax can NOT be reimbursed.
Hence it makes absolute sense to transfer pension funds to a vested benefit foundation in a low-tax canton!
How to save tax?
Step 1 - Transfer your pension fund to a vested benefit foundation
Transfer your pension fund assets from your company pension fund to a vested benefit account. The transfer process can take up to 30 days during which time your assets are blocked.
Step 2 - Inform your local municipal office of your pending departure
Go to your municipal office and tell them that you are leaving Switzerland for good. The municipal office will provide you with a confirmation document.
Step 3 - Register as residents at the municipal office of your future place of residence
From this point on, you are subject to tax at your new domicile.
Step 4 - Fill out a payment order with the vested benefit foundation
You nee to provide the following documentation for the payment to be approved:
Confirmation of departure from the local municipality
Copy of passport or ID with legible signature
Recent foreign certificate of residency (no older than 3 months)
Confirmation of civil status (if married, a certified signature of the spouse is mandatory)
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