Leaving Switzerland Non-EU pillar 2 access

Hello MoneyGuru,

I have a question regarding Pillar 2 funds.

I am non-EU. I had used 50% of my Pillar 2 funds to buy a house in Switzerland. Now I am planning to leave Switzerland and move to a non-EU country (Australia/Canada). I would like to keep the house and rent it out. The cantonal authorities have confirmed that I will be allowed to do this.

My question is, at the time of departure, will I have access to the remaining Pillar 2 funds or do I have to first return the fund amount used for purchase of the house in order to access the whole amount. Also, if I don't need to repay, can I transfer the rest Pillar 2a into a vested savings account in low-tax canton and withdraw only at retirement? How long before departure would you suggest I do this?

Thanks a lot for your advice. Much appreciated.

Hi SwissAndy,

You are not obligated to repay early withdrawals for the purpose of buying a primary residence. Owning a property purchased with pillar 2 assets does not affect your eligibility to withdraw assets upon retirement.

You can choose to keep your vested benefits in Switzerland after you leave. You can transfer them from one Swiss vested benefits foundation to another at any time, even when you no longer live in Switzerland.

There is no need to transfer them to a low-tax canton before leaving Switzerland. This can be done any time before you cash out your benefits when you retire. For example, you can hold your vested benefits with the most favorable vested benefits account, retirement fund or digital retirement asset manager to optimize yields, and only open a vested benefits account in a low-tax canton just before you cash out your vested benefits in order to minimize the withholding tax.

If you live in either Australia or Canada when you cash out your Swiss benefits, transferring your benefits to a vested benefits foundation in a low-tax canton (like Schwyz) is important. The reason for this is that the Swiss double taxation agreements with Australia and Canada do not give you the right to reclaim the Swiss withholding tax. This means you will pay possible Australian or Canadian taxes plus the Swiss withholding tax. For this reason, you will want to minimize your Swiss withholding tax payment.

If you live in one of the countries below when you retire, Swiss withholding tax is less relevant. These countries have double taxation agreements with Switzerland that let you reclaim Swiss withholding tax on pillar 2 benefits:

• Algeria
• Argentina
• Austria
• Belgium
• Colombia
• Côte d'Ivoire
• Croatia
• Czech Republic
• Ecuador
• Egypt
• Estonia
• Finland
• France
• Germany
• India
• Indonesia
• Iran
• Ireland
• Japan
• Lithuania
• Luxembourg
• Malaysia
• Mexico
• Montenegro
• Morocco
• New Zealand
• Peru
• Poland
• Portugal
• Russian Federation
• Serbia
• Slovakia
• Slovakia
• Slovenia
• South Korea
• Spain
• Sri Lanka
• Thailand
• the Philippines
• Tunisia
• Turkey
• Uruguay
• US
• Venezuela
• Vietnam

Best regards from Moneyguru

Thanks a lot for the detailed response, Moneyguru. 

Much appreciated.

So I shall leave the money in the vested fund till retirement.

Considering that the taxation rates are so high in Australia/Canada, would you advise that I withdraw my Pillar 2 now rather than at retirement and avoid the higher taxes. I would of course be paying the Swiss taxes at current rates. Being non-EU, I am allowed to completely withdraw my current Pillar 2 savings.

Thanking you again for this precious feedback.

Best regards,

Andy

Hi SwissAndy,

Consider consulting the Canadian and/or Australian tax offices for information on the taxation of pension benefits in those countries. It is possible that tax exemptions or reductions may apply to withdrawals of foreign pension assets upon retirement.

Withdrawing your assets before you leave Switzerland can make sense in some cases. This could be the case if you could invest the capital at a higher return/lower cost outside of the pillar 2. It could also make sense if the Swiss retirement capital withdrawal tax is lower than applicable taxes in your future country of residence.

Note that the Swiss capital withdrawal tax varies between cantons and the amount of assets withdrawn. It can be up to double as high in some cantons than in others.

If you withdraw pillar 2 benefits before you leave Switzerland, take the time to look into possible taxation of wealth in your future country of residence. Currently, neither Australia nor Canada levies wealth taxes, but the introduction of wealth taxes is increasingly being discussed in both countries.

Depending on the value of your Swiss pension fund benefits, it could be worth consulting a tax advisor specialized in repatriation to Australia/Canada.

Best regards from Moneyguru

Hey MoneyGuru,

Similar-ish situation to above (also relocating to non-EU), and curious around withdrawing pillar 2 benefits before leaving Switzerland.

Apart from the with-holding/capital withdrawal tax on this Pillar 2 lump sum amount (based the canton where I am registered at the time as I'd still be in Switzerland), are there any other taxes to consider? e.g. the Pillar 2 lump sum wouldn't be considered for any income or wealth taxes (from the Swiss side?). I don't believe so, but just wanted to confirm!

Thanks :)

Paying the cantonal capital withdrawal tax while still living in Switzerland is only possible under some circumstances e.g. you are buying a home, you become self-employed, etc.

Otherwise you will can only withdraw when you can prove that you are leaving Switzerland, in which case you pay the withholding tax. Unless the non-EU country you are moving to has a double-taxation agreement with Switzerland, you will want to transfer your benefits to the lowest-tax canton (Schwyz) before withdrawing because you will not get the Swiss tax back. Even if you are moving to a country with a relevant DTA, you may want to transfer to Schwyz because it may be some time before you can get the money reimbursed.

Pillar 2 withdrawals are not eligible for Swiss income tax. You only pay the much lower capital withdrawal tax, and the lump sum does not count towards your taxable income.

Once withdrawn, your benefits will count towards your taxable wealth for wealth tax, but that is only relevant if you remain a tax resident of Switzerland (e.g. you withdraw for self-employment, etc. well ahead of moving abroad).

I will leave Switzerland this year and live in a non-EU/ EEA country.

I wish to cash out my Pillar II. I currently reside in Kanton Zürich.

How does one transfer the cash to somewhere in Schwyz?

What does one transfer it to (bank account, another pension scheme, ...)?

How does one then cash out in Schwyz and pay the lower capital withdrawal tax?

You have to transfer the benefits to a vested benefits account (German: Freizügigkeitskonto. French: compte de libre passage). You are transferring the money to a vested benefits foundation (German: Freizügigkeitsstiftung. French: fondation de libre passage). Some vested benefits accounts from vested benefits foundations in Schwyz are:

• The Finpension vested benefits foundations
• The Liberty vested benefits foundation
• The Tellco vested benefits foundation
• The vested benefits foundation from the Sparkasse Schwyz
• The vested benefits foundation of the Schwyzer Kantonalbank

Ask your employer's pension fund for a vested benefits transfer form. You can also get this form from the foundation where you will transfer your benefits to. Fill out the form and send it to your pension fund. It can take as long as a couple of weeks until the money is transferred to your new account.

After you have moved to your new country, you can tell the foundation that you want to withdraw the money because you have moved to a non-EU/EFTA country. They will give you a withdrawal due to emmigration form (you might also find this form on their website). Fill out the form and send it in. Depending on the foundation, they might need other documents, like proof that you are a tax resident in your new country.

Once the foundation receives the form and any needed documents, they will pay out the money to the account you specify after subtracting the Schwyz withholding tax. It might take a few weeks until you get the money.

You can compare Swiss vested benefits accounts using the moneyland.ch comparison. The fees charged for early withdrawals due to migration are shown on the product information pages, and it is worth accounting for them when comparing the costs.
Swiss Vested Benefits Account Comparison