Withholding tax on lump-sum benefits from pensions

There are 100 pension foundations in Switzerland, 51 third pillar (3a) foundations and 49 vested benefits foundations (FZ). 13 of these pension foundations are based in the canton of Schwyz because this canton has the lowest withholding tax on lump-sum pension provision in Switzerland. It amounts to a maximum* of 4.8 % and includes both cantonal and municipal taxes as well as federal tax.  More information on withholding tax can be found in the comparison table below.

*The federal tax is progressive. There are various models in the cantons.

Maximum withholding tax rate (federal, cantonal and municipal combined)

What is a withholding tax and when does it apply?

Withholding tax is applicable if you are resident abroad when drawing second or third pillar pension assets. In this case, the Swiss government has no direct access to you and therefore levies capital withdrawal tax at source, i.e. at your pension scheme. The pension scheme must deduct the withholding tax from the pension assets and pay it to the government. You will be paid out the net amount.

How can you benefit from the low withholding tax?

As you can see from the comparison table, it is worth choosing a pension foundation based in the canton of Schwyz. Especially if you are thinking of emigrating. You may also be considering transferring your pension assets to a foundation in the canton of Schwyz shortly before you move abroad. Although you will benefit from low withholding tax, you will pay a high fee with most providers. The reason for this is that it is a time-consuming and risky process for most foundations. This is why this service is not actively advertised.

finpension also offers this service primarily for existing customers and charges significantly higher fees if the foundation is used exclusively for processing payouts abroad. However, there are alternative providers such as Liberty Vorsorge. It offers an emigration service precisely for this purpose, in order to benefit from the low withholding tax in the canton of Schwyz when withdrawing abroad.

Can the withholding tax be reclaimed?

The withholding tax can be reclaimed provided that a double taxation agreement exists with the country in which you (newly) reside. The tax office of the canton of Zurich has published a list showing the countries in which the withholding tax can be reclaimed (see page 6 and onwards of the information sheet published by the cantonal tax office on the withholding tax of private pension benefits to persons not resident or domiciled in Switzerland). However, a reclaim is only possible if you disclose the capital withdrawal to the tax authorities in your home country.