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Old 04.05.2019, 15:45
klausenhauser klausenhauser is offline
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Re: Lump sum payments of Pillar 2 and 3a after leaving to Canada

From what you wrote,

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.

I interpret it as that Switzerland can tax the payout according to Swiss Law.

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.

If it is an annuity or periodic the highest tax rate Switzerland can charge cannot exceed 15%.

If you take out a lump sum, Switzerland has first dibs on tax and there is no maximum amount based on this treaty (it will just follow Swiss Law)

If you take out a periodic sum, Switzerland has first dibs on tax and there is 15% maximum amount based on this treaty.


It does not mention how after the the taxes are deducted by the arising state (Switzerland), how it will be treated in the contracting state, Canada.

At the end of the day, Canada can STILL tax you after and that is under Canadian law, not this treaty. Canada should take into the account how much tax you paid already. There is no maximum rate of tax Canada agrees not to tax you at. This treaty just states that Switzerland can tax you before Canada.

Will you be a resident of Canada at the time of the payout? Also will you be considered a tax resident of Canada during the year of the payout. If you are neither then you arent liable for Canadian taxes. ie. You could be lying on a beach in Thailand when the transaction goes through and have not resettled back in Canada at the same time.

You could also send a letter to Revenue Canada asking them in this particular case. They reply with a FEW months. I did that in regards to my tax status to get a letter saying they no longer consider me a resident of Canada and thus do not need to file any taxes.
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