Germany–Switzerland · Occupational pensions
Pillar 2 · Lump sum benefits · German residenceSwiss occupational pensions: lump sum withdrawals after moving to Germany
If you withdraw a lump sum from a Swiss occupational pension fund only after moving to Germany, the payout may be subject to German tax. The amount and payment date are not the only decisive factors. In particular, the benefit must be split into its mandatory component (Obligatorium) and extra-mandatory component (Überobligatorium). Other relevant factors include the type of pension fund, the contribution and contractual history, the Germany–Switzerland double taxation agreement and a possible refund of Swiss withholding tax.
Starting point
Moving to Germany before the payout: timing is decisive for tax purposes
A common situation is a move from Switzerland to Germany while the pension assets initially remain in the Swiss occupational pension fund or with a vested benefits institution.
If the lump sum is paid only after a residence has been established in Germany, the benefit must be assessed from the German tax perspective. Previous residence in Switzerland does not automatically place the payout outside the scope of German income tax.
At the same time, a Swiss occupational pension fund should not be treated as a single uniform product for tax purposes. Before calculating the tax, it is particularly important to determine how much relates to the statutory mandatory component and how much to the extra-mandatory component.
The Swiss tax perspective
This page covers German taxation after the move. TaxRep Switzerland examines the Swiss requirements for lump sum withdrawals and Swiss withholding taxation from the Swiss perspective.
Timing
Before, during or after the move?
The same Swiss pension benefit can fall into a different tax situation depending on the recipient’s tax residence when the benefit is actually received.
Payout while resident in Switzerland
The benefit generally falls initially within the Swiss tax system. Whether Germany already has taxing rights depends on the specific residence and tax residency circumstances.
Residence in both countries
If accommodation or other tax connections exist in both countries at the time of the payout, residence under the tax treaty must first be determined.
Payout while resident in Germany
If the recipient is resident in Germany at the time of the payout, the lump sum must generally be classified under German income tax law.
The date the money reaches the bank account is not the only relevant factor
What matters is when the benefit is received for tax purposes or when the recipient gains economic control over it. The move and the payout should therefore not be planned solely around the bank transfer date.
The essential split
Assess mandatory and extra-mandatory benefits separately
For Swiss pension funds governed by private law, German supreme court case law distinguishes between the statutory mandatory component and a legally separate extra-mandatory component.
These two components can be subject to entirely different German tax rules. A calculation based solely on the total payout is therefore generally insufficient.
- Identify the mandatory retirement assets under the BVG
- Show extra-mandatory assets separately
- Determine the type of pension institution
- Reconstruct the contribution history
- Establish when the pension arrangement began
- Classify each component separately for tax purposes
Overview
The lump sum is broken down into its components for tax purposes
| Component | Basic German tax classification | Key review points |
|---|---|---|
| Mandatory component | Generally a benefit from a pension arrangement comparable to statutory pension insurance | Taxation under section 22 of the German Income Tax Act (EStG) |
| Separate extra-mandatory component of a pension fund governed by private law | Pension or insurance arrangement governed by private law | Contract inception date, contribution period and section 20 EStG |
| Pension fund governed by public law | Separate review required; the distinction between mandatory and extra-mandatory benefits cannot simply be applied as it is to a private-law fund | Legal nature and specific basis of the benefits |
| Vested benefits assets | The tax character of the transferred pension assets remains relevant | Reconstruct the original pension fund arrangement and the split between components |
Mandatory benefits
Lump sums from the mandatory BVG component are generally taxable in Germany
Under German case law, benefits from the mandatory component of a Swiss occupational pension fund are generally comparable to benefits from statutory pension insurance.
A lump sum payout from this component is therefore treated as an “other benefit” under the pension taxation framework of section 22 EStG. The payout does not become tax-free merely because it is paid as a lump sum rather than as a monthly pension.
The taxable portion is determined under the German rules applicable to basic retirement provision. The taxable percentage applicable to the relevant benefit year must therefore be taken into account.
The entire lump sum is not necessarily taxable
Classification under section 22 EStG does not automatically mean that 100% of the payout is treated as taxable income. The statutory pension taxation rules applicable to the particular benefit year are decisive.
Extra-mandatory benefits
Extra-mandatory benefits may fall under insurance taxation rather than statutory pension taxation
Where the extra-mandatory component of a Swiss pension fund governed by private law is based on a separate private-law pension arrangement, it cannot automatically be treated in the same way as statutory pension insurance.
Instead, the lump sum may need to be assessed under the German rules for private pension insurance or life insurance contracts.
It is then particularly important to establish when the pension arrangement began, how long it has existed, which contributions have been paid and under what conditions the lump sum is paid out.
Contract inception
Pension arrangements established before 2005 may be subject to different German transitional rules.
Duration
The length of membership and the contribution period can be decisive for German taxation.
Return component
For newer insurance arrangements, the difference between the benefit and the contributions paid may be particularly relevant.
Older contracts
Joining before 2005 can make a substantial difference
Particularly for employees with long periods of service, the extra-mandatory pension arrangement may have been established before 1 January 2005.
For these older contracts, the former German rules governing lump sum benefits from pension insurance with a lump sum option may continue to apply. Subject to the conditions applicable at the time, certain lump sum benefits could be tax-free after a sufficiently long contract and contribution period.
The German Federal Fiscal Court has expressly applied these rules for older contracts to the extra-mandatory component of certain Swiss pension funds governed by private law.
Retain evidence of the joining date
For pension fund arrangements dating back several decades, a lack of evidence showing when the extra-mandatory arrangement began can have costly tax consequences. Historical pension statements, employer certificates and pension fund regulations should therefore be obtained wherever possible.
Newer pension arrangements
For contracts from 2005 onwards, the difference between benefits and contributions is often decisive
For private insurance arrangements established after 2004, German taxation generally follows the newer framework in section 20(1) no. 6 EStG.
The focus is typically on the difference between the insurance benefit and the total contributions paid towards it, rather than on the entire lump sum.
Subject to the statutory conditions, only part of this difference may be included in taxable income where the contract has run for a sufficiently long period and the recipient has reached the required age at payout.
Whether these rules actually apply to the particular extra-mandatory pension fund component must be examined using the fund regulations and the individual pension history.
Germany–Switzerland tax treaty
After the move, taxing rights generally belong to Germany
If the recipient of the lump sum is resident in Germany under the treaty at the time of receipt, the Germany–Switzerland double taxation agreement must be considered when assessing the pension fund benefit.
In the relevant cases, German courts have not automatically classified Swiss pension fund benefits as pensions under the treaty’s general pension article. In the circumstances decided, the treaty framework allocated taxing rights to Germany as the state of residence.
- Determine residence on the benefit payment date
- Document the change of residence
- Consider the treaty before assessing domestic withholding
- Determine German taxation under the EStG
- Then claim any available Swiss withholding tax refund
Swiss withholding tax
The pension fund may initially deduct Swiss tax even where Germany has taxing rights
Lump sum benefits paid by a Swiss pension institution to individuals resident abroad may initially be subject to Swiss withholding tax.
This does not necessarily mean that the tax remains payable in Switzerland permanently. If the recipient is resident in Germany and the treaty assigns taxing rights to Germany, the Swiss withholding tax can generally be reclaimed through the prescribed refund procedure.
Swiss form Q-IS is available for reclaiming withholding tax on benefits from pension institutions with their registered office in Switzerland.
| Step | Procedure |
|---|---|
| 1. Payout | The Swiss pension fund pays the lump sum and deducts withholding tax where applicable |
| 2. Germany | Report the lump sum benefit in the German income tax return |
| 3. Q-IS | Prepare the Swiss refund application |
| 4. German tax authority | Obtain confirmation of German residence and the authority’s acknowledgement of the lump sum benefit |
| 5. Switzerland | Send the application and the pension institution’s benefit statement to the competent authority in the canton of the institution’s registered office |
Review Swiss withholding tax before claiming a German tax credit
To the extent that Switzerland has no final taxing right under the treaty, the Swiss refund procedure should generally be examined first. Refundable foreign tax should not simply be treated as a permanent foreign tax credit in Germany.
Vested benefits accounts
Moving to Germany does not automatically trigger taxation of vested benefits assets
If pension assets are first transferred to a vested benefits institution when a person leaves a Swiss occupational pension fund, this must be distinguished from an actual payout to the insured person.
In a direct transfer that preserves the statutory restrictions on the assets, the insured person does not receive the capital for unrestricted use. German case law has therefore not automatically treated such legally restricted transfers as a taxable receipt.
If the vested benefits assets are subsequently paid into a personal bank account, however, an actual lump sum withdrawal takes place. The original tax composition of the assets must then be reconstructed.
The transfer does not eliminate the distinction between components
The fact that the money is now held in a vested benefits account does not turn the mandatory and extra-mandatory components into a single new asset with uniform tax treatment. The history of the original pension fund should be preserved for German tax purposes.
Relocation planning
Compare a lump sum withdrawal before and after the move
If you can control the timing of a move to Germany and a substantial pension fund withdrawal, the two events should be analysed together.
A simple comparison of nominal Swiss and German tax rates is not enough. Relevant factors include the specific tax classification of the mandatory and extra-mandatory components, treaty residence, potential Swiss withholding tax, German progressive taxation and the actual timing of receipt.
| Question | What to check before moving |
|---|---|
| When does Swiss residence end and German residence begin? | Map domestic residence, the actual move and treaty residence on a timeline |
| When can the pension fund make the payout? | Review the fund regulations and statutory grounds for withdrawal |
| How large is the mandatory component? | Ask the pension fund for a written breakdown |
| How long has the extra-mandatory arrangement existed? | Obtain the joining date and the earliest contribution records |
| Will Swiss withholding tax arise? | Identify the canton in which the pension institution has its registered office |
| What will the German tax burden be? | Model both components separately |
Example
A CHF 400,000 lump sum withdrawal after moving
An individual works in Switzerland for many years, then moves to Germany and, six months later, receives a CHF 400,000 lump sum from a Swiss occupational pension fund governed by private law.
The pension fund confirms that CHF 250,000 relates to the mandatory BVG component and CHF 150,000 to a separate extra-mandatory component. The extra-mandatory pension arrangement has already existed for many years.
For tax purposes, the CHF 400,000 must not be treated as one uniform benefit:
Mandatory component
The mandatory portion is assessed under the German pension taxation rules in section 22 EStG.
Extra-mandatory component
This portion is reviewed separately using the insurance and contribution history.
Withholding tax
Any Swiss tax deduction is reviewed separately to determine whether it is refundable under the treaty.
The example illustrates the method, not a flat tax rate
The actual German tax can be calculated only once the type of pension fund, contract inception date, contributions, age at payout, payment year and other personal income are known.
Documentation
These documents should be available before the payout
| Document | Purpose |
|---|---|
| Current pension fund statement | Establish the total assets and pension position |
| Written breakdown of mandatory and extra-mandatory components | Provide the basis for the German tax calculation |
| Pension fund regulations | Determine the legal nature of the individual benefits |
| Confirmation of the joining date | Document when the pension arrangement began |
| Historical pension statements | Trace the development of the extra-mandatory component |
| Employer and employee contribution records | Establish the contribution history and any relevant difference between benefits and contributions |
| Vested benefits statements | Reconstruct the history across multiple pension institutions |
| Lump sum benefit statement | Establish the gross benefit, payment date and tax deduction |
| Swiss withholding tax certificate | Support the refund procedure |
| Evidence of German residence | Apply the treaty and claim a Swiss withholding tax refund |
Approach
Review a lump sum withdrawal after moving in eight steps
Residence
Determine tax residence on the payout date.
Fund type
Establish whether the pension fund is governed by private or public law.
Breakdown
Quantify the mandatory and extra-mandatory components.
History
Reconstruct the joining date and contributions.
Mandatory benefits
Determine the taxable portion under section 22 EStG.
Extra-mandatory benefits
Apply the relevant tax rules for insurance arrangements.
Withholding tax
Review the Swiss tax deduction and a refund using form Q-IS.
Tax return
Document the lump sum and the calculation for German tax purposes.
Frequently asked questions
Swiss pension fund lump sum withdrawals after moving to Germany
Do I have to pay German tax on a Swiss pension fund lump sum received after moving?
Is the entire payout taxable?
How is the mandatory component taxed?
How is the extra-mandatory component taxed?
Can the extra-mandatory component be tax-free?
What applies to a public-sector pension fund?
Is a transfer to a vested benefits account already taxable?
Does Switzerland deduct withholding tax on a lump sum withdrawal?
How can I reclaim Swiss withholding tax?
Can I simply credit the Swiss withholding tax against German tax instead?
Is it more tax-efficient to withdraw the capital before moving to Germany?
Which document is most important?
Further tax knowledge
Related Germany–Switzerland topics
Germany–Switzerland tax advice
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