A tax is payable on capital withdrawals from the second or third pillar. In this article, we show you how the lump-sum withdrawal tax is calculated in your canton and why it is referred to as a “reduced” tax – including tables and specific examples.
Table of content
When do I have to pay capital withdrawal tax?
Are you withdrawing pension assets from the 2nd or 3rd pillar? Then a reduced lump-sum withdrawal tax applies. This applies to payouts from pillar 3a, pension funds and vested benefits accounts. The tax is levied at federal, cantonal and municipal level. If you belong to a religious denomination, a tax is also levied for the church.
3rd and 2nd pillar withdrawal tax: comparison of the cantons
The capital withdrawal tax differs depending on the canton and the amount of capital. We have listed the tax rates for lump-sum withdrawals from pension funds and pillar 3a from all cantons, namely municipal, cantonal and federal taxes combined. The table can be sorted as desired.
| 50'000 | 100'000 | 250'000 | 500'000 | 1 Mio. | 2 Mio. | 5 Mio. | 10 Mio. | 20 Mio. | |
|---|---|---|---|---|---|---|---|---|---|
| AG, Aarau | 3.2% | 4.9% | 7.2% | 8.3% | 8.8% | 9.0% | 9.1% | 9.1% | 9.1% |
| AI, Appenzell | 2.4% | 3.3% | 4.6% | 5.2% | 5.3% | 5.3% | 5.3% | 5.3% | 5.3% |
| AR, Herisau | 7.6% | 8.0% | 9.0% | 9.9% | 11.1% | 11.7% | 12.0% | 12.1% | 12.1% |
| BE, Bern | 3.6% | 4.7% | 6.6% | 8.4% | 9.7% | 10.5% | 11.1% | 11.2% | 11.3% |
| BL, Liestal | 3.5% | 3.9% | 4.9% | 6.7% | 9.6% | 9.7% | 9.7% | 9.7% | 9.7% |
| BS, Basel | 3.7% | 5.3% | 8.3% | 9.5% | 10.0% | 10.1% | 10.2% | 10.3% | 10.3% |
| FR, Fribourg | 2.0% | 3.3% | 7.0% | 9.3% | 10.4% | 10.9% | 11.1% | 11.2% | 11.3% |
| GE, Genève | 2.9% | 4.6% | 6.7% | 7.8% | 8.5% | 8.7% | 8.9% | 8.9% | 9.0% |
| GL, Glarus | 4.8% | 5.2% | 6.2% | 6.7% | 6.9% | 6.9% | 6.9% | 6.9% | 6.9% |
| GR, Chur | 2.9% | 3.2% | 4.3% | 5.7% | 5.9% | 5.9% | 5.9% | 5.9% | 5.9% |
| JU, Delémont | 5.4% | 6.2% | 8.6% | 9.7% | 10.1% | 10.2% | 10.3% | 10.3% | 10.4% |
| LU, Luzern | 3.8% | 5.1% | 7.0% | 8.0% | 8.4% | 8.5% | 8.5% | 8.5% | 8.5% |
| NE, Neuchâtel | 4.9% | 5.7% | 7.9% | 8.5% | 8.8% | 8.8% | 8.9% | 8.9% | 8.9% |
| NW, Stans | 2.7% | 3.7% | 5.0% | 5.6% | 5.7% | 5.7% | 5.7% | 5.7% | 5.7% |
| OW, Sarnen | 5.4% | 5.8% | 6.8% | 7.3% | 7.5% | 7.5% | 7.5% | 7.5% | 7.5% |
| SG, St. Gallen | 5.5% | 5.9% | 6.9% | 7.5% | 7.6% | 7.6% | 7.6% | 7.6% | 7.6% |
| SH, Schaffhausen | 2.1% | 3.3% | 5.0% | 5.5% | 5.7% | 5.7% | 5.7% | 5.7% | 5.7% |
| SO, Solothurn | 3.5% | 5.0% | 7.0% | 7.7% | 7.8% | 7.8% | 7.8% | 7.8% | 7.8% |
| SZ, Schwyz | 1.3% | 2.4% | 5.7% | 8.5% | 10.4% | 10.4% | 10.4% | 10.4% | 10.4% |
| TG, Frauenfeld | 6.2% | 6.6% | 7.7% | 8.2% | 8.4% | 8.4% | 8.4% | 8.4% | 8.4% |
| TI, Bellinzona | 4.0% | 4.4% | 5.4% | 7.3% | 8.1% | 8.1% | 8.1% | 8.1% | 8.1% |
| UR, Altdorf | 3.9% | 4.3% | 5.3% | 5.8% | 6.0% | 6.0% | 6.0% | 6.0% | 6.0% |
| VD, Lausanne | 3.4% | 4.6% | 7.0% | 8.4% | 9.1% | 9.3% | 9.4% | 9.5% | 9.5% |
| VS, Sion | 4.4% | 4.8% | 6.3% | 9.1% | 10.3% | 10.3% | 10.3% | 10.3% | 10.3% |
| ZG, Zug | 1.8% | 2.9% | 4.6% | 5.8% | 6.3% | 6.4% | 6.5% | 6.6% | 6.6% |
| ZH, Zürich | 4.5% | 4.9% | 5.9% | 7.2% | 11.2% | 15.8% | 22.0% | 26.2% | 28.4% |
Assumption: Payment at age 65, single man, no religion (Source of tax data)
Source: Tax data from the federal tax calculator
How is the capital withdrawal tax calculated?
The tax laws of the cantons and the Confederation have the following common characteristics for the calculation of the capital subscription tax:
- The capital withdrawal tax is taxed separately from other income. It is, therefore, possible that two neighbours have to pay the same tax amount, even the taxable income differs significantly. The prerequisite for this is, that the capital or advance withdrawal is the same for both neighbours.
- If more than one lump-sum benefit (from Pillar 2 or Pillar 3) accumulates in one tax year, these benefits are combined to calculate the capital withdrawal tax. Payments to spouses are usually taxed jointly.
- The social deductions that are otherwise granted when calculating taxable income do not apply to capital benefits.
Different calculation methods of the cantons
The taxation of lump-sum benefits from the pension provision is calculated differently from canton to canton. Below we briefly explain the four calculation methods:
- Proportional to income tax rate (Swiss Confederation, AG, AI, GE, LU, NE, NW, OW, SH, SO, VD, and ZG): The capital withdrawal tax is a fraction of the tax that should have been paid on a corresponding income. Either one takes a fraction of the tax rate or the theoretical income tax. Both ways lead to the same result, a reduced capital withdrawal tax.
- Taxation according to the “Rentensatz” (GR, SZ, TI, VS, and ZH): This model is based on the income tax rate as well. However, the calculation is more complex. First, we look at how high a corresponding annual pension payment would be* if the retirement assets were withdrawn in pension form. With the pension amount determined in this way, the tax rate can be determined based on the income tax rate. This tax rate is then multiplied by the total capital withdrawal.
- Own tax rate for capital withdrawal (AR, BE, BL, BS, JU, and ZG):
A separate tax rate – also known as a staggered rate – is applied specifically for capital withdrawal. This rate is not dependent on the income tax rate and is listed separately in the tax law. - Fixed percentage for capital withdrawal (GL, SG, TG, and UR): After all, there are cantons that like things to be simple. They apply a fixed tax rate, which is payable on the entire capital payment. Regardless of the amount paid out, the tax rate is always exactly the same. The only reason that the tax rate in the comparison table also increases in these cantons with the increasing amount of capital withdrawal is the federal tax, which is not flat but progressive. However, this is substantially less than in other cantons.
*The pension conversion rate varies from canton to canton. Ticino and Valais use tables to convert lump-sum payments into life-long pensions. As there are different retirement ages for women and men, gender is also a determining factor in calculating the tax in these cantons.
Various cantons have additional guidelines in the form of minimum or maximum tax rates (AR, AI, BL, GR, LU, NE, NW, SZ, TI, VS, ZG, and ZH). Partly tax-free amounts are also granted (AG, BE, BS, FR, GR, VS).
The tax calculated with the tax rate is also called simple tax. It must be multiplied by the municipal and cantonal tax rate to obtain the effective tax amount.
Sample calculation: Proportional tax tariff for income (2024)
To illustrate this, let’s take the example of Mrs. Müller, single, non-denominational and resident in the municipality of Emmen LU. She would like to withdraw her vested benefits capital of CHF 250,000.
The canton of Lucerne taxes capital benefits from the pension plan at one third of the tax rate for income.
The tax rate for an income of CHF 250,000 is 4.97 percent (rounded). One third of this is 1.66 percent (rounded). Multiplied by CHF 250,000, this results in a simple tax of CHF 4,144. The tax rate of the municipality of Emmen LU is 3.75, multiplied by the simple tax this results in a capital withdrawal tax of CHF 15,540. Added to this is the federal tax of CHF 3,983, which was calculated using the same fraction model, but with a fifth.
The capital withdrawal tax for Mrs. Müller thus totals 19,523 francs, which corresponds to 7.81 percent of the vested benefits capital.
Sample calculation: Taxation according to the “Rentensatz” (2024)
Mr. Kälin, single, non-denominational, lives in the municipality of Schwyz SZ. His lump-sum withdrawal of CHF 250,000 is taxed at the pension rate. The tax law of the Canton of Schwyz states: “Capital benefits are calculated at the tax rate that would apply if an annual benefit of 1/25 of the capital benefit were paid instead of the one-off payment.”
1/25 of CHF 250,000 is CHF 10,000. The income tax rate for 10,000 francs of income is 1.275 percent. This rate is now multiplied by the total lump-sum benefit. This results in a simple tax of CHF 3,187.50. The simple tax must in turn be multiplied by the tax rate. The tax rate is 325 percent of the simple tax. The cantonal tax therefore amounts to CHF 10,359.
Together with the federal tax of CHF 3,983, this results in a total tax for Mr. Kälin of CHF 14,342 or 5.74 percent of the capital benefit.
Optimize capital withdrawal taxes
Staggered withdrawal
If you withdraw capital from Pillar 2 and Pillar 3 in a single year, you will pay more tax than if you stagger the withdrawals over several years. Even if you have several pillar 3a accounts, you should plan your withdrawals to optimize your tax situation.
Repayments of WEF advance withdrawals: paid capital withdrawal tax can be reclaimed
Did you know that you can repay the capital you withdraw from your occupational pension plan as part of home ownership promotion (WEF)? Capital withdrawal tax is payable on WEF withdrawals, as described above. You can reclaim this tax on the WEF advance withdrawal if you pay the withdrawal back into the pension fund. It is important to know that you must apply for a refund within three years, after which the right to a refund expires. There is no provision for automatic reimbursement. You must therefore take action yourself.
Should I invest the pension fund money?
If you have capital paid out from your pension fund or pillar 3a, you need to handle it carefully. After all, the money should last into old age. Instead of parking the assets in a savings account, you can also invest them, for example with the investment solution from finpension. Our withdrawal plan allows you to use the invested capital to pay yourself a pension.
Important: When you invest money, you run the risk of losses. You should therefore determine your risk appetite before you decide to invest. This also includes considering how long your investment horizon is.