Insights

Switzerland Proposes Higher Tax on Lump-Sum Pension Withdrawals

Patrik Schwarb 14 Feb 2025

An analysis by Tax Partner AG, Taxand Switzerland

The Swiss Federal Council has recently adopted the consultation draft for the “Relief Package 27”, which includes a potential increase in the taxation of lump-sum capital payments from pension plans (Pillar 2 and Pillar 3a) at the federal level. The consultation period runs until 5 May 2025, with the changes set to take effect by 2027 if approved.

Under the proposal, lump-sum pension withdrawals would be taxed at a higher progressive rate, with the maximum rate rising from 2.3% to 11.5% for amounts exceeding CHF 10 million. For example, a CHF 1,000,000 withdrawal would incur an additional federal tax of around CHF 20,000, while a CHF 2,000,000 withdrawal would face an additional burden of CHF 72,000.

Key positives of the proposal include:

• Buy-ins to pension funds remain tax-deductible.
• Investment income and accumulated capital continue to be exempt from income and wealth taxes.
• Cantons retain autonomy over tax rates for lump-sum withdrawals.
• Lump-sum withdrawals by spouses will be taxed individually, removing the current progressive impact of aggregation.
• Smaller withdrawals, particularly from Pillar 3a, will still benefit from lower tax rates.

Patrik Schwarb and Marija Ilić from our Swiss member firm Tax Partner AG have provided an overview of the key points and implications of this proposal in more detail here.

Article tags

Income Tax | Switzerland | Tax Reform