Cash withdrawals are subject to withholding tax

Cash withdrawals are subject to withholding tax in Switzerland. The rate varies from canton to canton but is generally moderate and depends on the amount of the withdrawal. Canton Schwyz has the lowest withholding tax rate in the country.

Since 2005, pension plan pay outs for persons moving to Germany have been assessed in Germany as income from “compulsory retirement insurance” (gesetzlichen Rentenversicherung, or basic coverage). Deferred lump-sum capital withdrawals, on the other hand, qualify as “other benefits” and are taxed at the full rate. Under the double taxation treaty signed between Switzerland and Germany, German taxpayers may claim reimbursement of the withholding tax deducted from their lump-sum capital withdrawals in Switzerland.

The compulsory portion must remain with a vested benefits institution

Pursuant to the treaty signed with the EU, the compulsory portion of a person's vested pension benefits must remain with a Swiss vested benefits institution until the person concerned reaches the legal retirement age. The compulsory portion may only be withdrawn in specific circumstances, for example for the acquisition of an own home.

Reinvestment offers advantages

Instead of cashing in your supplemental benefits, you can transfer your full vested benefit to an account with a Swiss vested benefits institution. People moving to Germany have to decide how to ensure that their pension assets continue to qualify as tied retirement savings capital while preserving their value and deferring taxation downstream.

Since 2005, the German tax authorities have followed an interpretation at variance with Swiss and international legal positions and with prevailing practice up to 2004. To date, Swiss pension plans have been regarded in part as occupational retirement schemes and in part as supplemental private retirement savings plans. The transitional tax law rules applicable in Germany since 2005 with regard to withdrawals from German occupational and private pension plans have not been applied in respect of Swiss pension plans.

Online calculator gives you an overview

Use our online calculator to see the advantages of transferring your entire vested pension benefit to a vested benefits institution (Online calculator Liberty Vorsorge) With just a few clicks you can analyse the effects on your personal situation of an immediate withdrawal as compared with a deferred withdrawal.