Persons employed by a Swiss company are required by law to contribute to an occupational benefits institution (pension plan), as are their employers. In the Swiss pension system, occupational benefits schemes are referred to as the 2nd pillar.

Pension assets in the 2nd pillar consist of a mandatory portion and an extra-mandatory portion.  According to Swiss and international law, the extra-mandatory portion of a member's vested termination benefits may be withdrawn in cash when he moves or returns to Germany before turning 59 (women) or 60 (men). A progressive time-based percentage of the withdrawal must be declared as taxable income in Germany.

So far, the German tax authorities have assessed all lump-sum withdrawals from the Swiss pension system, i.e. including the extra-mandatory portion, on an overall basis. Following a number of decisions of the Bundesfinanzhofs (BFH - Federal Finance Court), certain changes are in the offing in this respect. The extra-mandatory portion will henceforth be treated in the same way as benefits under a German life insurance policy; these are taxed at a favourable rate. Thus, extra-mandatory benefits from a Swiss pension plan are henceforth tax-free provided the member can show that he joined the Swiss pension plan before 2005 and that he has been a contributing member for at least twelve years; if that is not the case, then the interest portion of the pension assets qualifies as taxable income.

Liberty Pensions signals the recommendations of the Karlsruhe Oberfinanzdirektion and is planning to organise an information meeting for members, cross-border workers, consultants and other interested parties as soon as the tax authorities issue the relevant information.

Some of the individual German tax rules are extremely complicated. According to the Karlsruhe Oberfinanzdirektion (regional tax office), the  tax authorities should agree among each other how the BFH decisions are to be applied in practice. As a result, the tax offices are waiting to implement the decisions. In its message, the Oberfinanzdirektion advises taxpayers to appeal against the tax assessment in case of doubt.

The information meeting will be attended by qualified professionals who are well-versed in the subject matter and who will offer participants valuable input without obligation. After the presentations, participants will have the opportunity to network and exchange views over drinks.

Are you interested? Secure a seat now via e-mail so that we can send you additional information.

You will receive an official invitation to this event as soon the preparatory organisational work is done and the definitive date is set.