2nd & 3rd pillar - cashing out upon leaving CH

[OakbrookIL]

@DarkOrion

For 3rd pillar it is clear, I can liquidate the accounts, fill in the forms and cash out the full amount. But how do I pay taxes on that? And I remember some conversations about transfering those funds to a tax friendly canton (e.g. Schwyz) and cashing out there. Is there a company doing that? And if yes, what king of tax benefits vs process fees are we talking about? Because if it is just 1% in net gain, then I do not think it is worth the hassle.

As far as I understand, you need to live there, not just have your portfolio there.
I think you need to file that as Kapitalbezug in your tax filings. But give your tax office a call and they will be able to tell you.

[Phil_MCR]

You need to clarify a few points: when you will withdraw the pension funds and where you will be tax resident at that point.

If you withdraw while you are tax resident in Switzerland, you will pay Swiss taxes on it. The taxation method actually varies by canton and depending on the amount, it can vary in terms of which canton is more advantageous - see my thread here:

Capital withdrawal taxes on pensions by canton in Switzerland

You pay taxes on your pension if you withdraw it as capital e.g. Pilar 3a on retirement, Pillar 2 Vested Benefits on retirement, withdrawal for house purchase. The taxation of lump-sum benefits from pension provisions varies from canton to canton, and there are four main calculation methods. Different Calculation Methods of the Cantons Proportional to Income Tax Rate: Cantons: Federal, AG, AI, GE, LU, NE, NW, OW, SH, SO, VD, ZG The capital withdrawal tax is a fraction of the tax that would …

It could also be beneficial to stagger your withdrawals if you are able to e.g. take out some amount one year (e.g. to become self-employed) and then the rest when you leave.

The other scenario is where you withdraw the pension fund when you have already left Switzerland and are resident in another country. In which case, Switzerland will levy a withholding tax on the pension capital (this is the one that could be beneficial to have the pension capital in Schwyz).

However, in this scenario, you need to watch out about the new resident countries. Some countries such as Singapore will not tax you on the pension capital. Others, such as Spain will take 50% of your capital as tax.

[blings]

Hello, all the “options” are all well explained (google is your friend)… eg here is a good summary below from ubs.

I think the main worry is how any withdrawal is taxed by your new country, as this may mean that it may not be worth cashing. Also your age (if you are still working age you cannot cash within Switzerland). If you are living here, you pay tax at the special rate that applies to the canton you live. For cashing after you have left, it will be tax at source of the bank (so you could choose SZ).

https://www.ubs.com/ch/en/services/guide/pension/articles/ahv-pension-fund-and-pillar-3a-when-emigrating.html

[DarkOrion]

The idea would be to cash out before leaving CH, so that CH tax rates apply. Normally, you get a 30 day window from the moment you deregister, right? Is this not enough time to fill in the forms and get the process approved?

If this is done, I assume that you get taxed in CH and then the money gets deposited in your account and the new country of residence has no tax claim on it, as it is just a cash balance transferred (or not even transferred but kept in a normal CH account), right?

[CloudsInTheSky]

If you are not of pension age and withdraw purely for the reason of moving abroad, then no residency CH taxes can be applied, they will deduct automatically quellensteuer on those amounts, depending on the canton of the financial institution! that holds your money. For example for UBS it is Basel, and they say ~4% on amount for 3a pillar, the same for your non-obligatory parts of 2nd pillar.

[Fatmanfilms]

@DarkOrion

The idea would be to cash out before leaving CH, so that CH tax rates apply. Normally, you get a 30 day window from the moment you deregister, right? Is this not enough time to fill in the forms and get the process approved?

I think it’s very unlikely you will get this done in 30 days.
I cashed in my Swiss pension in FULL aged 52 moving to an EU country as I was not required to be insured as I chose not to work.
Paying Swiss withholding tax when living abroad, could be cheaper. Depending on where you are moving to, France for example taxes lump sums at a very low rate, you need to look into this very carefully.

[Roxi]

I seem to recall (no guarantees) that you need at least 6 months residence in the new country for early payout to happen. Transfer the funds to VIAC or finpension before payout (they’re both in a low-tax canton, SZ if memory serves) if that helps your tax burden.

[Never_TheLess]

VIAC is backed by WIR bank in Basel and is in fact one of the higher deducting funds Finpension’s funds are based in Schwyz.

[Fatmanfilms]

@Roxi

I seem to recall (no guarantees) that you need at least 6 months residence in the new country for early payout to happen. Transfer the funds to VIAC or finpension before payout (they’re both in a low-tax canton, SZ if memory serves) if that helps your tax burden.

Normally correct as generally you become tax residence after 6 months + 1 day in most jurisdictions. It may or may not be worth transferring as there will be exit costs, possibly 500 & the new company might be more complicated. I left mine with Pictet & Cie in Geneva because they accepted I was not married from my leaving certificate & just wanted confirmation since leaving CH.

[Phil_MCR]

Re-visiting this old thread. Another option is to quit and become self-employed:

c) If I become self-employed
You can withdraw your vested benefits if you are no longer subject to compulsory occupational benefit plans and take up self-employment in Switzerland, provided you can furnish proof that you are self-employed.

When you leave your former employer’s pension fund, you must decide whether you want to withdraw all or part of your vested benefits. This is the only time that you can split your vested benefits between two vested-benefits institutions. When you make a withdrawal, the entire account is always closed. Important note: Withdrawals diminish your 2nd-pillar assets, leading to a partial or total loss of benefits at retirement age, but generally also in cases of invalidity or death.

[Fatmanfilms]

@Phil_MCR

Re-visiting this old thread. Another option is to quit and become self-employed:

This must be done within 12 months of becoming self employed, I know a member of EF who applied late & was totally rejected. They originally did not think they needed the extra capital but cash flow was worse than expected.

[asinivali]

@Fatmanfilms

@DarkOrion

The idea would be to cash out before leaving CH, so that CH tax rates apply. Normally, you get a 30 day window from the moment you deregister, right? Is this not enough time to fill in the forms and get the process approved?

I think it’s very unlikely you will get this done in 30 days.
I cashed in my Swiss pension in FULL aged 52 moving to an EU country as I was not required to be insured as I chose not to work.
Paying Swiss withholding tax when living abroad, could be cheaper. Depending on where you are moving to, France for example taxes lump sums at a very low rate, you need to look into this very carefully.

Ah, I’ve been wondering a bit about this option… I’ve seen it mentioned as one way to get the full pension out, but basically nobody seems to have any actual experience with this.

What was the admin part like for this? Did you have to provide any proof that you wouldn’t be working or insured?

[Fatmanfilms]

@asinivali

What was the admin part like for this? Did you have to provide any proof that you wouldn’t be working or insured?

Considerable, they need confirmation from the new country that you are not subject to compulsory insurance, in addition to be registered with the tax authorities.