How are BVG lump-sum benefits taxed?
- In Switzerland lump-sum benefits from pension funds (such as the 2nd pillar) are taxed at a reduced rate, corresponding to 1/5 of the usual tax rate.
- The tax is collected by the canton of residence. A copy of the pension fund statement should be sent to the cantonal tax authorities.
- Persons domiciled abroad are taxed directly at the source in Switzerland.
Taxation of buybacks
A buy-in to the 2nd pillar allows you to fill gaps in your pension coverage. It is made directly with your pension fund, which will inform you of the amount you can buy in.
Buybacks are 100% tax-deductible, but to fully benefit from them, you must not withdraw your BVG capital within the following 3 years. In case of early withdrawal, the tax authorities will revoke the deduction by issuing a tax reassessment.
Tax on 2nd pillar withdrawals by French-speaking canton
1. Canton of Geneva, commune of Geneva
Withdrawal amount
CHF 50,000
CHF 100,000
CHF 250,000
CHF 500,000
CHF 1,000,000
Single person
1'457.55 CHF
CHF 4'620.85
CHF 16,725.40
39,272.85 CHF
CHF 84,957.70
Married person
464.70 CHF
CHF 3,126.60
CHF 14,622.80
CHF 35,746.50
CHF 80,379.30
2. Canton of Vaud, municipality of Lausanne
Withdrawal amount
CHF 50,000
CHF 100,000
CHF 250,000
CHF 500,000
CHF 1,000,000
Single person
CHF 1'690.60
4,658.85 CHF
CHF 17,552.35
CHF 42,172
90,781.30 CHF
Married person
CHF 1'345.55
3,691.15 CHF
15,236.15 CHF
CHF 38,187.15
87,097.50 CHF
Single-parent family
1'502.95 CHF
CHF 4,098.50
CHF 16,390.70
CHF 40,469.65
CHF 89,399.95
3. Canton of Valais, municipality of Sion
Withdrawal amount
CHF 50,000
CHF 100,000
CHF 250,000
CHF 500,000
CHF 1,000,000
Single person
CHF 2,185.55
CHF 4,760.45
CHF 14,483.20
38,041.30 CHF
CHF 103,000
Married person
CHF 2,100.40
CHF 4,498.60
CHF 14,052.20
CHF 37,171.15
CHF 101,400
4. Canton of Fribourg, municipality of Fribourg
Withdrawal amount
CHF 50,000
CHF 100,000
CHF 250,000
CHF 500,000
CHF 1,000,000
Single person
986 CHF
CHF 3,260
CHF 17,483
CHF 46,583
CHF 104,000
Married person
762 CHF
CHF 2,723
CHF 16,362
45,362 CHF
CHF 103,100
How can I save tax on a BVG withdrawal?
The LPP capital tax is progressive: the larger the lump-sum withdrawal, the higher the effective tax rate. The golden rule is to spread out withdrawals so that each one is taxed at a lower rate.
Another option is to legally establish residence in a canton with favorable tax conditions in the year of withdrawal. The tax domicile must be genuine and recognized by the cantonal authorities. Each canton applies its own tax scale on capital benefits, and the differences are significant: some cantons (Zug, Obwalden, Schwyz) have much lower rates than others (Vaud, Geneva, Neuchâtel).
Frequently asked questions
Capital benefits tax is due when you withdraw assets from your 2nd pillar, a vested benefits account, or your pillar 3a. This withdrawal can occur in several situations:
You're off to retirement and request all or part of the capital instead of an annuity.
You buy or renovate your house with your pension assets.
You become self-employed and leave the occupational pension plan.
You leave definitively Switzerland, under certain conditions.
You receive a capital in the event of divorce or asset sharing.
You become invalid and receive a lump-sum benefit.
You inherit a BVG capital inheritance following a death.
In all these cases, the capital is taxed separately at a reduced rate by the federal government, the canton, and the municipality, and even by the church if you are affiliated with it.
Monthly pension : taxed as an ordinary income to declare on your tax return.
Lump-sum payment (lump-sum or early payment) : subject to a capital gains tax, at a reduced rate and separate from income.
You must announce the received amount to your cantonal tax authorities if you live in Switzerland. The tax will be calculated according to a scale applicable to capital benefits (1/5 of the tax rate).
2nd pillar (occupational benefits):
- Employee contributions and voluntary buy-backs are deductible.
- Indicate them on your tax return.
3rd pillar A (tied personal pension provision):
- Contributions are deductible in the legal limit, depending on whether or not you are affiliated to the 2nd pillar.
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