Everything you need to know about the free passage account
In which situations is an open-ended account?
Temporary or permanent transfer of gainful activity
Divorce or dissolution of registered partnership
What is a foundation of free passage?
A period of unemployment, a career break, a stay abroad, training or maternity leave, when you leave a business.
If you do not claim your credit under the legal conditions for early retirement after the cessation of your activity, then the pension fund will automatically send your accumulated capital to the Fondation Institution Supplier, which is located in Bern.
When you resume a lucrative business, you are required to transfer your free-passage account to your new employer’s pension fund.
According to the law, assets already paid to a pension fund must remain in the provision of insurance. So you cannot have that money when you leave your business, but you have to pay it into a free-passing account of your choice, but this capital can be withdrawn in advance.
When you leave your employer, this is the only time when you can split it into two accounts, but you will not be able to open two accounts within the same foundation, so you will have to open two separate accounts.
Once the funds land in a free-passage account, it is no longer possible to split that account.
- Tax gain
You can stagger your withdrawals, which save taxes according to the MIG (Marginal Taxation Rate)
- Flexibility
It is possible to open either a liquidity account and an account with shares invested in securities, or two accounts with shares invested but in two different strategies.
Withdrawal if you are a tax resident in Switzerland
- It is levied by the Confederation (IFD) and the cantons, communes (ICC).
- It is calculated separately from other income at a preferential rate
- When you withdraw several benefits over the same tax period, then cumulation will be used for the calculation of the tax and not separately, in addition if you are married the couple’s benefits will also be accumulated.
These services are calculated separately at a particular rate. For direct federal tax, one fifth of the usual tax tariff is used, while varied tariffs exist in the cantons. However, occupational insurance may be considered to be subject to a lower tax rate than income from work.
In principle, provident capital is taxed separately from other income at a preferential rate. In the various cantons, however, different implementing rules for the determination of the tax are applied.
The following table gives an overview of the different rules for the taxation of capital arising from occupational insurance (2nd pillar), as well as from private insurance (a)). Adjustments and/or intermediate modifications in various cantons remain reserved.
|
Canton
|
Calculation rules
|
|---|---|
|
AG
|
Provident
capital is subject – separately from other income – to an annual tax,
which is calculated at 40% of the ordinary income tax.
|
|
AI
|
Separated
from other income, at annuity fee. Minimum rate of 3% (corresponds to
20,000 income), AI separated from other income, at annuity rate. Minimum
rate 3% (corresponding to 20,000 income) (rentals's rents for 1991)
|
|
AR
|
Separated from other income, at annuity rate. (rentals of 1991 pensions)
|
|
BE
|
Separated from other income, double tariff (progressive from 1 to 5% depending on capital)
|
|
BS
|
Separated
from other income, preferential tariff (progressive from 3 to 8%
depending on capital) Provided that the capital is paid to the person
concerned or someone for whom he or she is responsible, (Spouse, direct
descendant, children for care, or other person cared for by the person).
If the foresight capital is vested in someone else, the capital is
taxed with the other income.
|
|
BL
|
Separated from other income, at annuity fee. Minimum tariff 2% (rentals from 1991)
|
|
FR
|
Separated from other income (progressive from 2 to 6% depending on capital)
|
|
GE
|
Separated from other income up to one fifth of the single rate.
|
|
GR
|
Capital
is taxed according to the tax rate that would be applied (married or
otherwise) if, instead of the capital, an annuity equivalent to the
fifteenth of the capital was paid. The simple tax is at least 1.5%
(married), 2% (other). Maximum tax: 5.2% (married), 6% (other)
|
|
JU
|
Special rate.
|
|
LU
|
Separated
from other income up to one third of the capital, provided that the
principal is paid to the person concerned or someone for whom he is
responsible, (Spouse, direct descendant, children for care or other
person cared for by the person). At least 0.5% If the provident capital
is vested in someone else, the capital is taxed with other income.
|
|
NE
|
Separated from other income, up to a quarter of the ordinary tax (minimum 2.5%).
|
|
OW
|
Separated from other income, up to two fifths of ordinary tax.
|
|
SG
|
Separated
from other income at the rate of the annuity (according to the new 2001
table of annuities), Tariff applied - single rate, Married - discount
of 25 per cent. The simple tax (Tariff) is at least 2.715%, this rate is
applied from an amount of 20,000.-
|
|
HS
|
Capital is taxed at one fifth of the ordinary tariff. A minimum of 0.5%.
|
|
SO
|
Separated from other income, up to one fifth of the ordinary tax.
|
|
S
|
Capital
is taxed according to the tax rate that would be applied (married or
otherwise) if, instead of the capital, an annuity equivalent to 1/25 of
the capital was paid. The simple tax is a maximum of 2%. A division
factor of 1.9 is applied to married couples.
|
|
TG
|
Capital
is taxed according to the tax rate that would be applied (married or
otherwise) if, instead of the capital, an annuity equivalent to the
fifteenth of the capital was paid. The simple tax is at least 2%
(married), 2.5% (other).
|
|
RT
|
Rate of the pension, minimum 2%. Table by age.
|
|
UR
|
Separated from other income, up to two fifths of ordinary tax.
|
|
VD
|
Separated from other income up to one third of the ordinary tariff.
|
|
VS
|
Separated from other income, at annuity fee. Minimum tariff 2%, maximum rate 4%
|
|
G
|
Taxes
amount to 30% for the first 200,000.- and 40% for the following
200,000.- (married or unmarried). The simple tax is at least 1%.
|
|
H
|
Capital
is taxed according to the tax rate that would be applied (married or
otherwise) if, instead of the capital, an annuity equivalent to one
tenth of the capital was paid. The simple tax is at least 2% of the
capital.
|
|
Confederation
|
Separated from other income, up to one fifth of the ordinary tax.
|
| Capital benefit | |||||
| 100’000 | 200’000 | 400’000 | 500’000 | 1’000’000 | |
| GE | 3’181 | 10’681 | 27’279 | 35’873 | 80’512 |
| VD | 3’737 | 11’122 | 28’909 | 38’442 | 87’324 |
| VS | 4’510 | 11’020 | 31’685 | 45’258 | 101’400 |
| FR | 5’074 | 15’652 | 42’452 | 55’852 | 122’540 |
| NE | 5’144 | 13’183 | 33’125 | 42’137 | 87’664 |
| JU | 5’109 | 13’335 | 30’885 | 39’660 | 83’222 |
| AI | 2’700 | 8’279 | 20’352 | 26’112 | 54’600 |
| SZ | 1’654 | 6’727 | 23’833 | 34’429 | 96’130 |
Withdrawal if you are a tax resident in France
Despite what you can hear, it is in France that the final tax is due if you withdraw second-class or third pillar A capital and not in Switzerland, an exception must be of Swiss nationality and have been an employee of the civil service.
According to art. 163 bis of the General Tax Code (GIC), pension benefits paid in the form of capital may, on request, be subject to a levy at the rate of 6.75% instead of the progressive scale.
- I request the withdrawal from my pension fund 2nd pillar or from the foundation which holds my free passage account
- Switzerland pays the funds and levyes a tax at source which will depend on the amount
- I transfer these funds to France by negotiating my exchange rate well so as not to be penalized
- I declare the year following the capital received in fiscal year n-1 through Annex 2042 in 1AT or 1BT by using the Bank of France’s tax exchange rate of the day.
- I get a tax notice where my withdrawal is
- I contact the Cantonal Fiscal Administration, where the fund/foundation that paid me the funds to him is in place to claim reimbursement of the levy at source.
- French tax notices
- The certificate of payment of the second pillar or third pillar A
- AVS number
- An identity document
- One RIB in CHF
- Complete and stamp the following form by the French Tax Service in your region https:// www.ge.ch/document/demand-refund-tax-source-preleve-prospers-from- institutions-prevoyance-super-their-siege-suisse/telecharger
Under what conditions can you withdraw your 2nd LPP pillar or free passage account?
- Financing renovation work for the main dwelling
- Financing / amortisation of the housing loan, minimum amount CHF 20,000 if the money is in the pension fund, if the free passage account no minimum
- Permanent departure from Switzerland, if you remain in the European Union you can withdraw only the over-compulsory share, if you leave the European Union you can withdraw the whole
- Buy shares in a cooperative construction company
- Self-employment as a self-employed person (individual reason)
- Perception of a full disability pension
Some important concepts apply for withdrawal in the context of a purchase in the main residence
- up to the age of 50, you can withdraw all your insurance assets;
- after 50 years, you can only withdraw a limited amount;
- you can only request an early withdrawal every 5 years;
- you must seek the consent of your spouse or partner if you are married or in a registered partnership;
- you must reimburse the second pillar received in advance to buy your home if you sell it.
According to Article 79B al3 if you have made a redemption in the second pillar you have to wait 3 years before making a withdrawal.
If you have made an EPL withdrawal, you will first have to repay it before making a new tax-deductible redemption.
You will be reimbursed the tax when the EPL withdrawal is repaid.
Care should be taken not to make a redemption in the second pillar maximum 3 years before the statutory retirement age so as not to be penalised when applying for the capital withdrawal.
Divorce
Share your asset
The share of the exit benefit (also frequently referred to as the “free passage provision”) is shared between the date of the conclusion of the marriage and the date of commencement of divorce proceedings. The principle is that each spouse is entitled to half of the exit benefit from the other spouse.
If one of the spouses is not a member of a pension fund, the money is transferred to a bank free-passage account or to the free-term insurance policy.
The equitable distribution of the assets of the second pillar accumulated during the marriage must apply irrespective of the matrimonial regime. Therefore, even if you have made a marriage contract and opted for the property separation regime, this does not prevent you from having to distribute in principle equitably the second pillar assets accumulated during the period of the marriage. Depending on the specific case, the sharing of the LPP may also replace all or part of the maintenance contribution (5A-296/2014).
Under certain conditions, it is possible to renounce sharing.
But the General Court is always free to decide to apply the legal principle of sharing, despite the parties’ agreement to the contrary.
