Taxes on foreign pensions in Switzerland

Do people with foreign pensions pay tax on their pensions in Switzerland?

Hi there,

Foreign old-age pensions are taxed differently depending on whether they are comparable to Swiss pension funds or not. This will be decided by the tax office.

Withdrawals from pension funds which are considered similar to Swiss pension funds are taxed at the same reduced rate which applies to Swiss pensions when performed after you reach retirement age. Pension savings are not counted as taxable wealth until they are withdrawn.

When a foreign pension fund is not considered comparable to Swiss pension funds, assets held in the fund must be taxed as wealth and you do not benefit from lower income tax rates when you withdraw your assets.

Switzerland has tax treaties with a number of countries which prevent you from paying taxes both in Switzerland and in the country which your pension originates from. If your pension is taxed at the source in another country, ask a tax advisor whether that country has tax agreements with Switzerland which can help you avoid paying Swiss taxes on top of foreign taxes.

Best regards from Moneyguru

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Dear Moneyguru,

It is an old post but what would be the taxation in Switzerland of a Canadian pension plan (RRIF) taken as periodic payment as a resident of Basel-Stadt. The CA-CH tax treaty says that the tax withholding on a periodic payment would be 15% in Canada . But are we certain that the taxation in Switzerland of such pension from Canada would be zero? It must have to be declared somewhere in the Swiss tax return. I struggle finding the information clearly.

Thank you so much in advance

Peter

It is usually best to ask the cantonal tax authority directly. As a rule, the answers are good.

The general rule in Switzerland is that pensions are taxable income.

For Canadian social security pensions it would be:

• 15% Canadian withholding tax.
• Two-thirds of your pension counts as taxable income in Switzerland.

The idea is that because the Swiss tax just two-thirds of your pension, that compensates for the 15% taken by the Canucks. It's exactly the same for US social security pensions.

But an RRIF wouldn't fall under that legislation. My hunch is that the full pension is taxable income, just like a Swiss pension, but you're best off asking the Basel tax office directly. In the best case it may qualify as a life annuity and you will only have to tax part of it.