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Old 22.02.2021, 11:48
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Taxation on Pension lump sum

Hi Everyone.

I am asking this on behalf of a very concerned colleague. I know this is standard cover normally for asking for oneself, but in this case, I can assure you its the case and any advice anyone can give us will be hugely appreciated.

I will use an example, with example figures, however the situation is very real.

Colleague X bought a house 5 years ago in Canton Valais. As part of a purchase price of 1 million CHF she used the fonds props of their pension (excuse my spelling), i.e. she invested some of her pension to raise the funds to buy the house.

Roll on some years and they have been made redundant from a very long serving job. As a result she received a substantial redundancy payout, of which to optimize tax, she has put 100k into her pension as a top-up. You can make one deposit every 5 years as I understand it of a cash amount to increase your pension size.

Upon receiving her tax bill for that year, she has found that because she used pension to buy the house, they do not consider the voluntary payment into the pension to be tax free, but in fact it is considered as normal income and taxed accordingly, leaving a very (very) significant) tax bill. The money is also now in the pension and it is not clear whether it can be even withdrawn, leaving the huge tax bill to be paid while the funds are now potentially locked.

Can anyone confirm whether, for canton Valais at least, this rather important point: that if you inject money into your Pension as a voluntary contribution, it is not in fact a tax free injection if you have previously used pension money to buy a house because it is considered a repayment of that debt so is normal income ?

Many thanks for any help received.
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Old 22.02.2021, 11:57
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Re: Taxation on Pension lump sum

Hi!

If you are talking about 2nd pillar, it does not matter in which Canton you reside, it depends on the company where you have your 2nd pillar.

As a rule:

Versements anticipés pour l’encouragement à la propriété du logement

Si vous avez bénéficié de versements anticipés de vos prestations de vieillesse du 2e pilier dans le cadre de l’encouragement à la propriété du logement, vous ne pouvez procéder à des rachats volontaires qu’une fois ces
versements anticipés entièrement remboursés. Si vous atteignez l’âge légal de la retraite AVS dans moins de 3 ans, cette restriction ne s’applique pas.
Tous les versements anticipés du 2e pilier n’ayant pas encore été remboursés sont pris en compte, peu importe que vous les ayez obtenus chez nous ou auprès d’autres institutions de prévoyance. Les versements anticipés du
3e pilier A ne sont pas concernés

Advance payments for the encouragement of home ownership

If you have received advance withdrawals of your 2nd pillar retirement benefits as part of the promotion of home ownership, you can only make voluntary purchases once these advance payments are fully repaid. If you reach the legal AHV retirement age in less than 3 years, this restriction does not apply.
All 2nd Pillar advance payments that have not yet been repaid will be taken into account, regardless of whether you have received them from us or from other pension funds. Advance withdrawals from the
3rd Pillar A are not concerned
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Old 22.02.2021, 12:01
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Re: Taxation on Pension lump sum

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Hi!

If you are talking about 2nd pillar, it does not matter in which Canton you reside, it depends on the company where you have your 2nd pillar.

As a rule:

Versements anticipés pour l’encouragement à la propriété du logement

Si vous avez bénéficié de versements anticipés de vos prestations de vieillesse du 2e pilier dans le cadre de l’encouragement à la propriété du logement, vous ne pouvez procéder à des rachats volontaires qu’une fois ces
versements anticipés entièrement remboursés. Si vous atteignez l’âge légal de la retraite AVS dans moins de 3 ans, cette restriction ne s’applique pas.
Tous les versements anticipés du 2e pilier n’ayant pas encore été remboursés sont pris en compte, peu importe que vous les ayez obtenus chez nous ou auprès d’autres institutions de prévoyance. Les versements anticipés du
3e pilier A ne sont pas concernés

Advance payments for the encouragement of home ownership

If you have received advance withdrawals of your 2nd pillar retirement benefits as part of the promotion of home ownership, you can only make voluntary purchases once these advance payments are fully repaid. If you reach the legal AHV retirement age in less than 3 years, this restriction does not apply.
All 2nd Pillar advance payments that have not yet been repaid will be taken into account, regardless of whether you have received them from us or from other pension funds. Advance withdrawals from the
3rd Pillar A are not concerned
ok so that confirms it I think ? If you have say 100k as a house deposit from p2, then until that 100k is repaid (which would be taxed normally) you are not considered to be make a (tax free) lump some payment.

thanks, its really appreciated.
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Old 22.02.2021, 13:26
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Re: Taxation on Pension lump sum

But can you do the other way: you pay in advance, then withdraw. Do you get all the tax deductions?
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Old 22.02.2021, 14:09
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Re: Taxation on Pension lump sum

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You can make one deposit every 5 years as I understand it of a cash amount to increase your pension size.
.
You can pay any year but: 1) you are limited by what the pension fund allows. 2) The first five years after taking up Swiss residency your payments are capped 3) If you intend to use it for financing a self lived in house there is a cool of period of three years after the last payment (or you must pay the full tax).


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If you are talking about 2nd pillar, it does not matter in which Canton you reside, it depends on the company where you have your 2nd pillar.


Anyway, the basic and mot important rules regarding pillar 2 taxation is set by federal law.


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Can anyone confirm whether, for canton Valais at least, this rather important point: that if you inject money into your Pension as a voluntary contribution, it is not in fact a tax free injection if you have previously used pension money to buy a house because it is considered a repayment of that debt so is normal income ?
Correct. However, not all is lost and more can be gained. With repaying part of the funds she can request a reimbursement of the applicable pay out tax. It must be requested! And it can be done up to three years after the repayment. The request for reimbursement must be made by the authority which levied the payout tax.,

https://sozialversicherungen.admin.c.../6946/download
https://www.taxinfo.sv.fin.be.ch/tax...n+Wohneigentum
https://finpension.ch/de/rueckzahlung-wef-vorbezug/
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