The Swiss occupational pension scheme (BVG) is a crucial part of the compulsory Swiss social security system, providing each employee the chance to maintain living standards after retirement.
The BVG recognizes two different savings plans. One is the legally capped maximum insurance salary (CHF 90,270 in 2025), which in common terminology is called the mandatory amount or "BVG Obligatorium." The other part is the insurance salary that is regulated only by the statutes of the different pension foundations and exceeds the maximum amount; this is known as the extra-mandatory part or "BVG Überobligatorium."
When an individual withdraws Swiss pension fund capital after leaving Switzerland permanently, a withholding tax is levied on the payout amount. The applicable withholding rate varies by canton and is generally lower than ordinary income tax rates. This withholding tax rate applies to both mandatory and extra-mandatory benefits.
The right of taxation is determined by the relevant double taxation agreement (DTA) between Switzerland and the individual’s residence country. In many cases, the country of residence is granted the right to tax the payout. If that is the case, the withholding tax deducted in Switzerland can usually be reclaimed in full or in part, provided the foreign tax authorities assume taxation of the benefit and the actual payout of Swiss pension fund savings was made at a time the beneficiary was already a tax resident in the other state.
For such withdrawals, it is essential to clearly distinguish between mandatory and extra-mandatory BVG assets and to ensure that the relevant differentiations and declarations are made, as the tax treatment of the two BVG components may differ, particularly in cross-border situations. Missing or incorrect declarations may lead to additional tax claims or double taxation.
This distinction is especially important given the different tax treatment of the two BVG components in various countries. For example, while France, Italy, the Netherlands, and Spain have differing regulations regarding the taxation of Swiss pension capital, in practice these countries usually do not differentiate between mandatory and extra-mandatory pension assets. Instead, payout amounts are generally taxed as income or according to the general rules for foreign pension or lump-sum benefits.
Germany, on the other hand, is a key example of a country that does distinguish between the two BVG categories. According to the Swiss Federal Statistical Office, there were nearly 65,000 German-resident cross-border commuters working for a Swiss employer in Q1 2025. According to case law from the German Federal Fiscal Court, Germany differentiates between the legally prescribed minimum coverage (mandatory) and the portion exceeding this (extra-mandatory) when determining the tax treatment for contributions made during ongoing Swiss employment arrangements or at the time of payout of the funds (at the time of departure from Switzerland or upon reaching retirement age). Contributions to extra-mandatory salary components are generally treated as additional benefits (taxable income) while contributions up to the legally capped maximum are treated as tax deductible social contributions. Conversely, the taxable base when cashing out the extra-mandatory part is only the difference between the actual payout amount and the contributions made, as those contributions have already been taxed during the contributory period.
Switzerland has entered into bilateral agreements with the EU and EFTA states that provide further important provisions regarding the right to withdraw from the Swiss pension fund when leaving Switzerland and the withdrawal from the Swiss pension fund obligation. In accordance with these agreements, employees who have accumulated assets in the Swiss pension fund can generally have the accumulated assets paid out when they leave Switzerland. If the country of departure is in the EU or EFTA, only the accumulated assets relating to the savings contributions to the extra-mandatory scheme can be paid out. However, the accumulated assets, which are made up of the contributions relating to the maximum mandatory portion of the insured salary, remain in the Swiss pension scheme in vested benefits accounts until the regulatory or statutory retirement age is reached.
When individuals leave for non-EU or non-EFTA countries, it is generally possible to claim the payout of the entire savings balance from the Swiss pension fund (that is, both the mandatory and extra-mandatory components).
The distinction outlined above regarding individuals who leave Switzerland for an EU/EFTA or non-EU/EFTA country does not affect the previously mentioned taxation rights for the payout of Swiss pension funds according to the applicable DTA, because the treaties themselves generally do not distinguish between the legal capped maximum insured part and the extra-mandatory part. This does not include potential distinctions from a unilateral tax code view, as Germany’s, for example.
For more information on the tax considerations when withdrawing capital from Swiss pension funds, please consult your regular BDO contact or the authors of this article.
Dejan Milosevic
Timothy Brechbuehl
BDO in Switzerland
