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-   -   Zug Domiciled Vested Pension 2 account (https://www.englishforum.ch/finance-banking-taxation/274920-zug-domiciled-vested-pension-2-account.html)

S-Man 20.09.2017 20:08

Zug Domiciled Vested Pension 2 account
 
Hi,

I have been looking for a vested pension account which is domiciled in Zug. There is a possibility that I will need to leave CH to find work and Zug would make good tax planning should I decide to cash out my 2nd pillar pension

Can anyone recommend an account that us do icicles in Zug as my search has proved fruitless.

I really appreciate any help and advice you may be able to offer on this.

Thanks

fatmanfilms 21.09.2017 14:34

Re: Zug Domiciled Vested Pension 2 account
 
Quote:

Originally Posted by S-Man (Post 2850111)
Hi,

I have been looking for a vested pension account which is domiciled in Zug. There is a possibility that I will need to leave CH to find work and Zug would make good tax planning should I decide to cash out my 2nd pillar pension

Can anyone recommend an account that us do icicles in Zug as my search has proved fruitless.

I really appreciate any help and advice you may be able to offer on this.

Thanks

Swiss withholding tax is just withholding tax, the payout may be fully taxable in your new residence making the amount you pay in CH irrelevant. For info, the size of your fund has an effect of the cheapest canton .

aSwissInTheUS 21.09.2017 15:12

Re: Zug Domiciled Vested Pension 2 account
 
Quote:

Originally Posted by fatmanfilms (Post 2850454)
Swiss withholding tax is just withholding tax, the payout may be fully taxable in your new residence making the amount you pay in CH irrelevant. For info, the size of your fund has an effect of the cheapest canton .

Just a question: Why would a lump sum payout be taxable in a new country of residence? It is money earned in the past in another tax domicile.

Or actually even better and simpler, do you have an example where such a lump sum payout is taxed?

S-Man 22.09.2017 10:44

Re: Zug Domiciled Vested Pension 2 account
 
Fatmanfilms - Thanks for you response. Maybe I used the wrong terminology in my op. When leaving CH and moving to the UK I need to cash out the pension. On cashing out I must leave a proportion of the balance in a vested account here in CH and pay tax on the cash I withdraw. Based on the value of my pension fund Zug is the most attractive option. Sorry if I missed you, this has nothing to do with tax in the UK (to the best of my knowledge).

fatmanfilms 22.09.2017 15:42

Re: Zug Domiciled Vested Pension 2 account
 
Quote:

Originally Posted by aSwissInTheUS (Post 2850479)
Just a question: Why would a lump sum payout be taxable in a new country of residence? It is money earned in the past in another tax domicile.

Or actually even better and simpler, do you have an example where such a lump sum payout is taxed?

The money was saved tax free, it was never available for use in the original country without further tax being payable.
Lump sum can only be paid out AFTER leaving Switzerland, so the tax rules on where you now live count as most places demand tax on WORLDWIDE income. New disclose rules means that your new country will 100% be informed of the income.
I am a resident of Malta which only taxes foreign income remained to Malta, so by never taking my Swiss pension money to Malta I have no further liability other than Swiss withholding tax. So there is your example. As far as the UK is concerned it depends on the years the pension was accrued & many other things, it may or may not be taxable in the UK. If you were a non American who went to live in the USA, It would be fully taxable. I suspect France is the same & no doubt social charges will be added as well.
Quote:

Originally Posted by S-Man (Post 2850772)
Fatmanfilms - Thanks for you response. Maybe I used the wrong terminology in my op. When leaving CH and moving to the UK I need to cash out the pension. On cashing out I must leave a proportion of the balance in a vested account here in CH and pay tax on the cash I withdraw. Based on the value of my pension fund Zug is the most attractive option. Sorry if I missed you, this has nothing to do with tax in the UK (to the best of my knowledge).

Depending on your employment status at the time, you might be able to take 100% of the fund as cash. Some companies only pay the minimum required by law, others pay more, your talking about the non mandatory pension. The amount of money your withdrawing makes a difference & changing funds will cost 500, which may well exceed the tax saving. You need to confirm the tax status of the payout in the UK, if you look at the HMRC guidelines 80/90% is taxable, however it's much more complicated than that & could possibly be zero. Remember pension payouts capital in the UK 25% is tax free & 75% is taxable as normal income.

You can claim Extra Statutory Concession (ESC) A10 for all sums saved before 6 April 2011, those rights are grandfathered in.
A Swiss scheme is an Unapproved pension scheme for UK tax purposes.

aSwissInTheUS 22.09.2017 18:04

Re: Zug Domiciled Vested Pension 2 account
 
Quote:

Originally Posted by fatmanfilms (Post 2850951)
The money was saved tax free, it was never available for use in the original country without further tax being payable.
Lump sum can only be paid out AFTER leaving Switzerland, so the tax rules on where you now live count as most places demand tax on WORLDWIDE income. New disclose rules means that your new country will 100% be informed of the income.

I do not see the payment as an income at the day of payout. The income was in the past. If country X did not tax that income in the past should be of no concern for country Y.

Let say I have a similar account in an other country I would just declare it as part of my wealth here in Switzerland. No at payout time it just get transferred from one account into an other. My total wealth did not change, it actually reduced because of the payout tax I had to pay in the other country. Thus, it is not income from the Swiss point of view.

Now the problem. Damn Swiss tax law disagrees with my point of view: Art. 22 Abs. 1 DBG https://www.admin.ch/opc/de/classifi...index.html#a22
Quote:

1 Steuerbar sind alle Einkünfte aus der Alters-, Hinterlassenenund Invalidenversicherung, aus Einrichtungen der beruflichen
Vorsorge und aus anerkannten Formen der gebundenen Selbstvorsorge,
mit Einschluss der Kapitalabfindungen und Rückzahlungen von Einlagen, Prämien und Beiträgen.
One has indeed be careful what the tax law in the other country defines as income and if maybe a double tax agreement may address such situations.

fatmanfilms 22.09.2017 19:59

Re: Zug Domiciled Vested Pension 2 account
 
Quote:

Originally Posted by aSwissInTheUS (Post 2851023)
I do not see the payment as an income at the day of payout. The income was in the past. If country X did not tax that income in the past should be of no concern for country Y.

Let say I have a similar account in an other country I would just declare it as part of my wealth here in Switzerland. No at payout time it just get transferred from one account into an other. My total wealth did not change, it actually reduced because of the payout tax I had to pay in the other country. Thus, it is not income from the Swiss point of view.

Now the problem. Damn Swiss tax law disagrees with my point of view: Art. 22 Abs. 1 DBG https://www.admin.ch/opc/de/classifi...index.html#a22


One has indeed be careful what the tax law in the other country defines as income and if maybe a double tax agreement may address such situations.

Most countries tax income in the year it became available to the taxpayer to spend themselves. I don't know any that tax as your suggested, it would appear not even Switzerland.

If the money is not taxable in the new country the Swiss withholding tax is final, if it is taxable elsewhere the entire Swiss tax can be reclaimed if a tax agreement exists & then the full tax is paid in the new country. Being Taxable in the new country is the key word as no tax actually needs to be paid.
I am in a interesting situation with my UK pension, I can elect that £11,500 is taxable in the UK & 13,500 euros worth taxable in Malta. In both case zero tax is actually payable as each country allows me that amount tax free, the only stipulation is I can't take the UK money to Malta or it would be taxable in Malta. I had to fill in the UK's DTA form with Malta & have Malta tax office stamp the form.

EdwinNL 22.09.2017 20:41

Re: Zug Domiciled Vested Pension 2 account
 
Quote:

Originally Posted by aSwissInTheUS (Post 2851023)
I do not see the payment as an income at the day of payout. The income was in the past. If country X did not tax that income in the past should be of no concern for country Y.

Pension is delayed salary and therefor it has to be seen as taxable income on day of pay-out.


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