When a Swiss citizen is domiciled abroad, he or she is subject to the tax legislation of the country of domicile and it is in this state that he or she must pay tax. However, in certain situations he or she will still have some limited liability in Switzerland. That will be the case if he or she owns real property in Switzerland: such property, together with the income on it, is taxable in Switzerland. The same applies to securities or if the person concerned occasionally pursues an activity in Switzerland.
Switzerland has signed double taxation agreements with a number of states. These agreements stipulate which particular state has authority to levy which tax and are designed specifically to prevent a Swiss citizen from having to pay the same taxes in more than one country.
A number of general principles can be derived from these double taxation agreements.
Switzerland does not levy tax on such pension payments abroad. Tax will generally be levied in the country of residence.
Here a distinction must be drawn between pensions accruing from an employment relationship in public law or in private law:
These pensions are liable for taxation at source in Switzerland (except in the case of Australia). They will therefore not generally be taxable in the country of residence or, if so, on the basis of imputation against the tax paid in Switzerland will be imputed. On the other hand, in countries with which Switzerland has not concluded a double taxation agreement, double taxation may exist if the country of residence also levies tax on these pensions.
These pensions are liable for taxation at source in Switzerland if Switzerland has not signed a double taxation agreement with the country of residence. This may give rise to double taxation if the country of residence also levies tax on such pensions. Where these pensions are paid in the states with which Switzerland has signed a double taxation agreement, Switzerland does not collect tax at source. Taxation will then take place in the country of residence. These rules likewise apply to pensions accruing from private benefit schemes.
This capital is liable for taxation at source in Switzerland. A number of double taxation agreement nevertheless do provide the possibility of applying for a refund of this tax. On the other hand, in the countries with which Switzerland has not signed a double taxation agreement there is no possibility of applying for a refund. This may give rise to double taxation if the country of residence also levies tax on such capital.
If the application for payment in cash of the 2nd pillar savings capital is made when the person is still domiciled in Switzerland, the capital will be taxed at the rate applicable in the canton in which the person concerned is domiciled. On the other hand, if the application for payment is made when the person concerned is domiciled abroad the applicable rate will be that of the canton in which the occupational benefit scheme has its head office. The amount of tax collected varies from one canton to another. These aspects must therefore be weighed up carefully when planning emigration because a tax saving may possibly be made. The same consideration also applies to private benefit capital.
State Secretariat for International Financial Matters SIF
Tel.: +41 31 322 71 29
Fax: +41 31 324 83 71