How can you retire successfully outside Switzerland? What steps should I take to retire abroad? What pitfalls should you avoid?
What impact will this have on my assets?
Preparing for your retirement abroad involves examining your financial situation. We strongly recommend contacting the relevant institutions as soon as possible to clarify issues such as paying your pensions and insurance.
When you leave the country, it is important to ensure that your portfolios are integrated into solutions that comply with the tax and inheritance regulations of the country where you wish to settle. In many cases, adjustments are necessary to achieve the optimum tax position.
What about my pension?
Regarding the 1st pillar, it is your responsibility to apply for your AVS pension, so that it is paid when you reach legal retirement age. Other factors are considered when calculating the amount of the pension (average salary, years of contributions and family situation).
As far as the 2nd pillar is concerned, if you take it in the form of capital, the tax rate will depend on the country in which you settle. To this end, it will be important to determine whether there is a double taxation agreement between Switzerland and the country in question. The foundation's registered office may also be important, as it could determine the region of taxation in case of a withdrawal from abroad.
If your age and liquidity allow, there are tailor-made solutions for managing your vested benefits until you are 70.
As for the 3rd pillar, you can withdraw your assets or keep them until you reach statutory retirement age at the latest.
Annuities and insurance benefits
Ensure that pensions from the Old-Age and Survivors' Insurance (AHV), your pension fund or other insurance schemes can be paid out correctly. Notify your AHV compensation fund, your pension fund, and your insurers immediately of any change of address.
AHV pension
To draw your AVS pension abroad, you must notify your affiliated compensation fund of your departure so that it can pass on the information to the Swiss compensation fund in your last canton of residence. You can choose whether to receive your AVS pension in Switzerland or your future country of residence. Pensions paid abroad are paid in the local currency.
Tax when moving abroad.
Amount of tax
The amount of tax payable depends on the location of the last pension fund or vested benefits foundation where your assets were deposited. Double taxation agreements (DTAs) govern this process for some countries, but not all.
Tax on annuities
In Switzerland, no withholding tax is deducted from pensions unless there is a DTA with your country of residence. In this case, the tax is not refundable.
Tax liability on permanent departure
Unlimited tax liability ends if you leave Switzerland permanently. However, there may still be limited tax liability on real estate assets (e.g., buildings) located in Switzerland and on business profits made in the country. No withholding tax is levied on AHV pensions in Switzerland, but capital benefits from Swiss pension funds and provident institutions (2nd pillar, 3rd pillar) are subject to this tax. If Switzerland has concluded a double taxation agreement (DTA) with your country of residence, granting the right of taxation to that state, you may request reimbursement of the withholding tax. Pensions (annuities) and fees received as a member of a board of directors are only taxed at source if the right of taxation lies with Switzerland. Dividends from Swiss companies, interest on bonds issued by Swiss borrowers and interest on Swiss bank deposits are subject to withholding tax (35%). If a DTA has been concluded with your country of residence, obtaining a partial refund (or total refund in exceptional cases) of this tax is possible. The income and assets taxable in your new country of residence depend on the tax legislation of that country.
What should you do with your property?
- Selling your property: If you decide to sell your property when you leave the country, capital gains tax will depend on the specific features of each canton.
- Renting out the property: If you decide to rent out your property, the income will be taxed in Switzerland, considering any income you may have generated abroad to determine the rate applied.
What about your estate?
- Taxation of real estate: Real estate is taxed according to the rates in force in the country where it is located.
- Taxation of assets: Your assets are taxed in your new country of residence. Assessing the tax burden your heirs will bear when you inherit is important.
When you move abroad, there are many factors to consider to preserve your standard of living and your current and future wealth. Tax rules change, difficulties can lurk in the details, and it's not always easy to find all the answers to your questions. That's why it's essential to call on a dedicated professional advisor who can answer all your questions and give you the peace of mind you need for this life project.
Piguet Galland is your advisory partner, able to help you manage your assets, finance your property, and plan and provide for your future. So, you can make decisions about your future move with complete peace of mind. Contact us today!