Swiss pension redemption

BobLob

I am 51 years old and I worked for 5 years in Switzerland where I will be entitled to a small pension. I would like to withdraw it to purchase a small house here in Ireland.

I was told that I could do it because I am over 50 and to purchase a house to live in.

According to the agreement between Ireland and Switzerland, I understand that I should pay taxes only on Switzerland's side, but I would like to be sure that nothing is due to the Irish revenue in this case.

If that weren't the case, I'd prefer to leave them where they are, it is not a big lump anyway.

Thank you in advance for any help you can give me.

"ARTICLE 18 PUBLIC FUNCTIONS : Remuneration, including pensions, paid by a Contracting State or a political subdivision or a local authority thereof or by an entity created and organised by a special law of such Contracting State, directly or out of a fund, to any individual who is a national of that State in respect of present or past services shall be taxable only in the State where the remuneration originates.

CONVENTION between Ireland and the Swiss Confederation for the avoidance of double taxation with respect to taxes on income and capital.

BobLob

Does anybody understand that?

I think is the case.

Articleby_Lisa_Cantillion-Taxation-of-Foreign-Pensions-in-Ireland-Walking-the-Tricky-Tightrope (1).pdf

LUMP SUM DRAWDOWNS FROM A FOREIGN

PENSION IN IRELAND

Background

To appreciate the taxation of lump sum drawdowns in Ireland it is important to understand

the historical position regarding the Irish taxation of lump sum drawdowns.

Prior to December 7, 2005, Ireland did not have any domestic legislation which taxed

lump sum drawdowns from pension funds. This meant that lump sums of 25% of the

value of a pension fund could be taken tax-free regardless of the value of the pension

fund. In Finance Act 2006 the Irish Revenue introduced section 790AA T.C.A.

1997 which put an end to this treatment. Section 790AA T.C.A. 1997 is the section

which governs the taxation of lump sum payments in excess of a tax-free amount.

This meant that the tax-free amount was capped at a value of €200,000 and any

excess over and above €200,000 would be taxed at 20% up to a total drawdown of

€500,000. Any balance over and above €500,000 would be taxed at marginal rates.

For the purposes of the legislation, “a lump sum” is a reference to a sum that is paid

to an individual under the rules of a “relevant pension arrangement.” A “relevant

pension arrangement” means any one or more of the following:

• A retirement benefit scheme within the meaning of Irish legislation which has

been approved by the Irish Revenue Commissioners

• An annuity contract or trust scheme or part of a trust scheme approved by the

Irish Revenue Commissioners

• A P.R.S.A. contract, within the meaning of Irish legislation

• A qualifying overseas pension plan

• A public service pension scheme within the meaning of Irish legislation

• An Irish statutory scheme

For the purposes of lump sum drawdowns from foreign pension schemes, the only

category that is relevant to consider is a qualifying overseas pension plan.

An “overseas pension plan” is defined in Irish legislation to mean a contract, an

arrangement, a series of agreements, a trust deed, or other arrangements – but not

a state social security scheme – which is established in, or entered into under the

law of the United Kingdom or a Member State of the European Communities, other

than Ireland itself.

For the purposes of the Irish legislation, a “qualifying overseas pension plan” means

an overseas pension plan (i) which is established in good faith for the sole purpose

of providing benefits of a kind similar to those referred to in Irish legislation, (ii) in

respect of which tax relief is available under the law of the Member State of the

European Communities in which the plan is established (or the United Kingdom) in

respect of any contributions paid under the plan, and (iii) in relation to which the relevant

migrant member of the plan complies with the requirement in Irish legislation

in order for it to qualify as a qualifying overseas pension plan.

The above requirements mean the administrator of the pension plan must have the

overseas pension plan “blessed” by the Irish Revenue Commissioners for it to fall

within the definition set out in section 790AA T.C.A. 1997. As a result, most foreign

pensions schemes are considered nonqualifying overseas pension plans because

they haven’t been blessed by the Irish Revenue Commissioners. Therefore, lump

sums from such pension schemes are not taxable in Ireland as we have no domestic

legislation to tax lump sums.

Jim2007

At the moment I assume the money is held by either a private trust fund owned by a Swiss financial institution or by the equivalent federal fund for the industry you worked in in Switzerland, is that the case?

Whether or not you can withdraw the full amount or even any of it is governed by EU directive and the Swiss bilateral agreement with the EU. In most cases it is not possible to withdraw the full amount and in some cases none at all. There have been several cases of people being scammed into paying fees to have their Swiss pension paid out only to end up with nothing as the applications were rejected. Where did you receive this advice from?

Depending on the residency of the Swiss pension trust, the exit tax in Switzerland could be 10% if registered in Zug, a little more or less if registered else where. I understand that the amount will be treated as a capital sum in Ireland and not subject to income tax, someone on the tax forum should be able to answer this.

Generally speaking it is not advisable to withdraw money from the Swiss second pillar because the conversation rate is hard to match with any other asset.

BobLob

https://www.boards.ie/discussion/comment/121859026#Comment_121859026

Hi Jim2007

Thanks for the contribution, I can assure you that you have already made contact with the Swiss authorities who hold the fund, thy have assured me that I can withdraw the entire amount if it is intended for the purchase of the house, they will pay the potential landlord directly and the taxation is by 10%.

The question is not having control of the small fund which in fact is not given to me, and paying taxes in CH of 10%.

Is there anything to pay here in Ireland? I assume not or yes?

BobLob

I meant  "I have already made contact"