Germany–Switzerland · Retirement provision
Pillar 2 · Vested benefits assets · German residenceSwiss vested benefits accounts after moving to Germany
If you leave Switzerland and initially retain your occupational pension assets in a Swiss vested benefits account or vested benefits policy, this does not automatically constitute a taxable payout. For German tax purposes, a distinction must be made between the restricted transfer of pension assets, their continued investment with the vested benefits institution and a subsequent actual lump sum withdrawal. The origin of the assets in the mandatory component (Obligatorium) and, where applicable, the extra-mandatory component (Überobligatorium) also remains relevant for tax purposes.
Starting point
A vested benefits account and an unrestricted lump sum payout are two different tax events
When Swiss employment ends without the existing pension assets being transferred directly to a new employer’s pension fund, occupational pension provision can be continued through a vested benefits institution.
The capital remains earmarked for pension purposes. The insured person does not automatically receive the pension assets in a personal bank account and cannot use them in the same way as ordinary, freely accessible assets.
This lack of unrestricted access is significant for German income tax. A legally restricted direct transfer of pension assets to a vested benefits institution must therefore be clearly distinguished from a subsequent actual lump sum withdrawal.
The Swiss perspective
This page covers German tax treatment after moving to Germany. TaxRep Switzerland examines Swiss vested benefits law, grounds for withdrawal and withholding tax from the Swiss perspective.
The Swiss pension system
What is a vested benefits account?
Vested benefits assets generally originate from occupational pension provision under the second pillar. When a pension arrangement ends before retirement, disability or death, an entitlement to a termination benefit, also known as a vested benefit, arises.
If occupational pension provision is not continued immediately with a new Swiss employer, the capital can be transferred to a vested benefits institution.
Occupational pension fund
The pension assets are originally accumulated during employment in Switzerland.
Vested benefits
After employment ends, occupational pension provision continues with restrictions on access to the assets.
Payout
The capital is actually paid to the insured person only when a permitted ground for withdrawal applies.
A vested benefits account is not a new third pillar
The assets generally retain their origin in occupational pension provision under the second pillar. They should therefore not be equated with an ordinary savings account or a Pillar 3a arrangement.
Transfer
A direct transfer to a vested benefits account does not automatically constitute a taxable receipt
If a termination benefit is transferred directly from a pension institution to a vested benefits institution under Swiss pension rules, the insured person does not personally receive the capital.
For corresponding legally restricted transfers, the German Federal Fiscal Court has held that the transfer to the vested benefits account does not, by itself, give rise to a taxable receipt by the insured person.
- Capital is transferred directly between pension institutions
- No payment into a personal bank account
- No unrestricted access for the insured person
- The pension purpose continues
- Assess the transfer and any subsequent payout separately
The specific transfer arrangement is decisive
The tax treatment depends on whether there is actually a restricted direct transfer within the Swiss pension system. If the capital is first paid to the insured person and subsequently reinvested, the circumstances are different.
Moving from Switzerland → Germany
Moving to Germany does not, by itself, trigger a payout from the vested benefits account
When the holder of a Swiss vested benefits account moves to Germany, the pension arrangement initially continues as long as the assets are not actually paid out.
From the German tax perspective, a change of residence alone does not automatically cause the entire vested benefits balance to be included in income in the year of arrival.
For future German taxation, however, the position of the pension assets at the time of arrival should be documented comprehensively. In particular, the origin and composition of the capital may be decisive when a later payout takes place.
Date of arrival
Document when German tax liability and German treaty residence begin.
Account balance
Retain evidence of the value of the vested benefits account at the time of the move.
Origin
Document the former pension fund and the mandatory and extra-mandatory components.
Origin of the pension assets
Transferring assets to a vested benefits account does not eliminate the mandatory and extra-mandatory components
The vested benefits account is initially simply the new arrangement through which the former pension fund assets continue to be held.
The original pension arrangement from which the capital arose therefore remains relevant for German taxation of a subsequent payout.
For a Swiss pension fund governed by private law, a distinction may be necessary between the mandatory BVG component and a separate extra-mandatory component. The tax classification of pension institutions governed by public law may differ.
| Origin | Relevance for German taxation of a later payout |
|---|---|
| Mandatory component | Generally requires a review under the pension taxation framework in section 22 of the German Income Tax Act (EStG) |
| Separate extra-mandatory component of a private-law pension fund | Insurance taxation may apply; the contractual and contribution history is decisive |
| Pension fund governed by public law | Requires its own classification; the same distinction as for a private-law fund cannot automatically be applied |
| Several former pension funds | The history may need to be reconstructed separately for each pension arrangement |
Keep historical documents
The subsequent vested benefits institution may not have all the information needed to allocate the assets for German tax purposes. Pension fund statements, joining dates and historical vested benefits statements should therefore be retained over the long term.
The period after arrival
How are returns on a vested benefits account treated while you are resident in Germany?
A Swiss vested benefits account cannot automatically be equated with an ordinary personal bank account. The assets remain part of a legally restricted pension arrangement and can generally be paid out only if specified conditions are met.
For German tax purposes, the specific structure of the vested benefits arrangement must therefore be examined. A vested benefits account, a vested benefits policy and a securities-based vested benefits arrangement may have different legal characteristics.
At the time of a later payout, particular care is needed to prevent amounts already recognised for tax purposes or personal contributions from being treated as income again. A clear record of changes in the balance during German residence is therefore important.
Vested benefits account
Document interest, restrictions on access and legal claims against the foundation.
Vested benefits policy
Review the insurance contract and possible German insurance taxation separately.
Securities-based arrangement
Analyse the investment structure and potential German capital income or investment fund tax issues.
No single answer applies to all vested benefits products
Whether ongoing taxable returns already arise during German residence depends on the legal and economic structure of the particular product. Swiss tax exemption during the accumulation phase does not automatically apply in Germany.
Lump sum withdrawal
The subsequent payout is the key event for German taxation
If the vested benefits assets are actually paid to the insured person after they have moved to Germany and become resident there, this is a different event from the original transfer to the vested benefits account.
The lump sum must now be classified under German income tax law. This generally requires tracing the origin and legal structure of the pension assets.
- Establish the gross payout in CHF
- Reconstruct the mandatory and extra-mandatory components
- Determine whether the original fund was governed by private or public law
- Review the contractual and contribution history
- Determine the German income category
- Claim any available Swiss withholding tax refund
Tax treatment
The entire account balance is not automatically taxed at a single uniform rate
A subsequent payout raises the same basic issues as a direct lump sum benefit from a Swiss occupational pension fund.
A portion originating from mandatory benefits may generally fall under the German pension taxation rules in section 22 EStG. By contrast, a separate extra-mandatory component of a pension fund governed by private law may need to be assessed under the rules for private insurance arrangements.
For older extra-mandatory pension arrangements, historical German rules for older contracts may also play a substantial role.
A vested benefits account does not reset the history
Temporarily holding former pension fund assets with a vested benefits institution does not automatically turn them into a single new investment with uniform tax treatment. The original pension history may remain decisive for German tax purposes.
Germany–Switzerland tax treaty
The tax treaty must also be considered when benefits are paid to a German resident
If the recipient of a vested benefit is resident in Germany when the lump sum is actually received, the Germany–Switzerland double taxation agreement must be applied alongside German income tax law.
In various circumstances, German case law has allocated taxing rights over benefits from Swiss pension funds and vested benefits institutions to Germany as the state of residence.
The specific treaty provision that applies depends on the type of original pension arrangement and the particular benefit. The payment should therefore not be assigned to a particular treaty article solely because it comes from a “vested benefits account”.
Swiss withholding tax
Swiss withholding tax may initially arise when benefits are paid to someone resident abroad
When a Swiss vested benefits institution pays a lump sum to an individual resident abroad, Switzerland may initially levy withholding tax on the pension benefit.
If the recipient is resident in Germany at the time of the payout and the treaty assigns the final taxing right to Germany, Swiss withholding tax can generally be reclaimed through the prescribed procedure.
The Swiss Federal Tax Administration provides form Q-IS for reclaiming withholding tax on benefits from Swiss pension institutions.
| Step | Procedure |
|---|---|
| 1. Payout | The vested benefits institution pays the lump sum and shows any withholding tax deducted |
| 2. Germany | Report the lump sum benefit under German tax law |
| 3. Residence confirmation | The German tax authority confirms treaty residence and its acknowledgement of the benefit |
| 4. Q-IS | Complete the Swiss refund application |
| 5. Switzerland | Submit the application to the competent authority in the canton where the pension institution has its registered office |
Do not simply treat refundable Swiss tax as final
To the extent that Switzerland has no final taxing right under the treaty, the Swiss refund procedure should be reviewed before a deduction is treated as a final foreign tax for German tax purposes.
A special type of payout
An early withdrawal for home ownership may already constitute a taxable benefit
Under certain Swiss conditions, pension assets may be used for home ownership before the normal retirement withdrawal.
If capital is actually released from the vested benefits institution to the insured person or to finance their home ownership, the event is no longer comparable, for tax purposes, to a mere restricted transfer to a vested benefits account.
The German Federal Fiscal Court has already considered early withdrawals from Swiss vested benefits and occupational pension arrangements. For German residents, such an early withdrawal must therefore be reviewed for German tax liability in the year of payout.
Vested benefits account or payout?
Clearly distinguish transfers, payouts and early withdrawals
| Transaction | Unrestricted access? | Key German tax question |
|---|---|---|
| Pension fund → vested benefits account | Generally no | A restricted direct transfer generally does not, by itself, give rise to a taxable receipt |
| Vested benefits account → new pension fund | Generally no | Review whether restricted occupational pension provision continues |
| Vested benefits account → personal account / payout | Yes | Classify the lump sum benefit under German tax law |
| Early withdrawal for home ownership | An economic benefit becomes available | Examine whether a taxable pension benefit arises |
Multiple vested benefits accounts
Separate accounts do not automatically change the German tax classification
In Switzerland, vested benefits assets may, subject to certain conditions, be divided between several vested benefits institutions.
For German tax purposes, however, the number of accounts is not the only relevant factor. What remains decisive is which pension asset components are held in each account and when a benefit is actually received.
Where payouts are later staggered, the original amounts allocated to each account should therefore be clearly documented.
Documentation
Which documents should you retain when moving to Germany?
| Document | Why it matters |
|---|---|
| Pension fund termination statement | Establish the amount and origin of the transferred pension assets |
| Transfer confirmation | Prove the restricted direct transfer to the vested benefits institution |
| Vested benefits agreement | Assess the rights and restrictions relating to the assets |
| Breakdown of mandatory and extra-mandatory components | Prepare for German taxation of a later lump sum benefit |
| Former pension fund regulations | Determine the legal nature of the original pension arrangement |
| Joining dates for former pension funds | Review whether rules for older contracts may apply |
| Value at the date of arrival | Document changes during German residence |
| Annual account or securities statements | Trace interest, changes in value and the product structure |
| Lump sum benefit statement | Record the subsequent payout and any Swiss tax deduction |
| Withholding tax certificate | Apply for a refund of Swiss withholding tax |
Practical approach
Review a vested benefits account after moving in eight steps
Arrival
Document when German tax liability begins.
Transfer
Check whether a restricted direct transfer took place.
Origin
Identify the original pension funds and pension components.
Breakdown
Document the mandatory and extra-mandatory components.
Product
Classify the account, policy or securities-based arrangement.
Accumulation
Review German tax treatment of ongoing returns.
Payout
Assess each component of the lump sum according to its origin.
Withholding tax
Coordinate the Swiss refund procedure using form Q-IS.
Frequently asked questions
Swiss vested benefits accounts for German residents
Is my vested benefits account taxed immediately when I move to Germany?
Is a transfer from a pension fund to a vested benefits account taxable?
What happens if the money is paid into my personal account first?
Does the split between mandatory and extra-mandatory benefits remain relevant?
How is a later payout taxed in Germany?
Is interest on a vested benefits account taxable in Germany?
What applies to a vested benefits policy?
What applies to a vested benefits portfolio invested in funds?
Is an early withdrawal for home ownership taxable?
Does Switzerland deduct withholding tax at payout?
Can I reclaim Swiss withholding tax if I live in Germany?
Which documents are particularly important?
Further tax knowledge
Related Germany–Switzerland topics
Germany–Switzerland tax advice
Have you moved to Germany and hold a Swiss vested benefits account?
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