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Old 04.05.2019, 13:59
bananebleue bananebleue is offline
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Lump sum payments of Pillar 2 and 3a after leaving to Canada

I have no plans to leave Switzerland, but if I do in the future, it would likely be to Canada. Thus, I am trying to figure out which taxes I would be liable for in the event that I cash out my Pillar 2 and 3a while resident there. Could anyone better versed in Legal-Speak interpret this portion of the agreement for me?

Article 18.1 here ...
1. Pensions and annuities arising in a Contracting State and paid to a resident of the other Contracting State, including payments under the social security legislation in a Contracting State, may be taxed in the State in which they arise, and according to the law of that State. However, in the case of periodic pension or annuity payments (except lump-sum payments arising under the surrender, cancellation, redemption, sale or other alienation of an annuity, and payments of any kind under an annuity contract the cost of which was deductible, in whole or in part, in computing the income of any person who acquired the contract), the tax so charged shall not exceed 15 per cent of the gross amount of the payment.

Does this mean that for full lump sum payments of Pillars 2 and 3a I would pay the rate here (approx 2-8% depending on amount and canton) and then could be taxed by Canada up to 15% total (with credit given for Swiss taxes paid)? Or does this only apply if I take it out in regular instalments - and thus they could tax me as they like in Canada? Or does it mean that Canada can't tax this money at all? (This is why I am not a lawyer or accountant.)

Oh, and for completeness for anyone who comes across this post: Pillar 1 (AHV) simply gets paid out upon retirement for Canadian residents.
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