How are BVG lump-sum benefits taxed?
- In Switzerland, lump-sum benefits from pension funds (such as the 2nd pillar) are taxed at a reduced rate, corresponding to 1/5 of the usual tax rate in most cantons.
- The tax is collected by the canton of residence. A copy of the pension fund statement should be sent to the cantonal tax authorities.
- Persons domiciled abroad are taxed directly at the source in Switzerland.
Taxation of buybacks
A buy-in to the 2nd pillar allows you to fill gaps in your pension coverage. It is made directly with your pension fund, which will inform you of the amount you can buy in.
Buybacks are 100% tax-deductible, but to fully benefit from them, you must not withdraw your BVG capital within the following 3 years. In case of early withdrawal, the tax authorities will revoke the deduction by issuing a tax reassessment.
Tax on 2nd pillar withdrawals: rates by canton
The table below provides a detailed comparison of the tax rates applied to the withdrawal of LPP capital (also applicable to pillar 3a withdrawals) across all 26 Swiss cantons. The data is calculated for the 2025 tax year and reflects the situation of a single 65-year-old man with no dependent children and no religious affiliation.
We have selected realistic withdrawal amounts ranging from 50,000 CHF to 2,000,000 CHF, allowing you to estimate the tax applicable to your situation. The indicated rates include all taxes (federal, cantonal, and municipal).
| Canton, Commune | 50'000 | 100'000 | 200'000 | 300'000 | 500'000 | 1 mio | 2 mio |
|---|---|---|---|---|---|---|---|
| Aargau (Aarau) | 3.2 % | 4.9 % | 6.57 % | 7.43 % | 8.3 % | 8.8 % | 9.0 % |
| Appenzell Inner-Rhodes (Appenzell) | 2.4 % | 3.3 % | 4.33 % | 4.78 % | 5.2 % | 5.3 % | 5.3 % |
| Appenzell Ausserrhoden (Herisau) | 7.6 % | 8.0 % | 8.69 % | 9.14 % | 9.9 % | 11.1 % | 11.7 % |
| Bern (Bern) | 3.6 % | 4.7 % | 6.04 % | 6.97 % | 8.4 % | 9.7 % | 10.5 % |
| Basel-Landschaft (Liestal) | 3.5 % | 3.9 % | 4.59 % | 5.04 % | 6.7 % | 9.6 % | 9.7 % |
| Basel-Stadt (Basel) | 3.7 % | 5.3 % | 7.67 % | 8.66 % | 9.5 % | 10.0 % | 10.1 % |
| Fribourg (Fribourg) | 2.0 % | 3.3 % | 5.79 % | 7.74 % | 9.3 % | 10.4 % | 10.9 % |
| Geneva (Geneva) | 2.9 % | 4.6 % | 5.73 % | 6.57 % | 7.8 % | 8.5 % | 8.7 % |
| Glarus (Glarus) | 4.8 % | 5.2 % | 5.92 % | 6.37 % | 6.7 % | 6.9 % | 6.9 % |
| Grisons (Chur) | 2.9 % | 3.2 % | 4.04 % | 4.49 % | 5.7 % | 5.9 % | 5.9 % |
| Jura (Delémont) | 5.4 % | 6.2 % | 8.02 % | 8.92 % | 9.7 % | 10.1 % | 10.2 % |
| Lucerne (Luzern) | 3.8 % | 5.1 % | 5.07 % | 5.71 % | 8.0 % | 8.4 % | 8.5 % |
| Neuchâtel (Neuchâtel) | 4.9 % | 5.7 % | 7.51 % | 8.01 % | 8.5 % | 8.8 % | 8.8 % |
| Nidwalden (Stans) | 2.7 % | 3.7 % | 4.74 % | 5.19 % | 5.6 % | 5.7 % | 5.7 % |
| Obwalden (Sarnen) | 5.4 % | 5.8 % | 6.41 % | 6.86 % | 7.3 % | 7.5 % | 7.5 % |
| St. Gallen (St. Gallen) | 5.5 % | 5.9 % | 6.64 % | 7.09 % | 7.5 % | 7.6 % | 7.6 % |
| Schaffhausen (Schaffhausen) | 2.1 % | 3.3 % | 4.52 % | 5.01 % | 5.5 % | 5.7 % | 5.7 % |
| Solothurn | 3.5 % | 5.0 % | 6.54 % | 7.26 % | 7.7 % | 7.8 % | 7.8 % |
| Schwyz (Schwyz) | 1.3 % | 2.4 % | 4.36 % | 5.97 % | 8.5 % | 10.4 % | 10.4 % |
| Thurgau (Frauenfeld) | 6.2 % | 6.6 % | 7.36 % | 7.81 % | 8.2 % | 8.4 % | 8.4 % |
| Ticino (Bellinzona) | 4.0 % | 4.4 % | 5.15 % | 5.60 % | 7.3 % | 8.1 % | 8.1 % |
| Uri (Altdorf) | 3.9 % | 4.3 % | 5.00 % | 5.45 % | 5.8 % | 6.0 % | 6.0 % |
| Vaud (Lausanne) | 3.4 % | 4.6 % | 6.36 % | 7.40 % | 8.4 % | 9.1 % | 9.3 % |
| Valais (Sion) | 4.4 % | 4.8 % | 5.50 % | 6.72 % | 9.1 % | 10.3 % | 10.3 % |
| Zug (Zug) | 1.8 % | 2.9 % | 4.17 % | 4.99 % | 5.8 % | 6.3 % | 6.4 % |
| Zurich (Zürich) | 4.5 % | 4.9 % | 5.63 % | 6.08 % | 7.2 % | 11.2 % | 15.8 % |
Example of tax on 2nd pillar withdrawals in French-speaking cantons
1. Canton of Geneva, commune of Geneva
Withdrawal amount
CHF 50,000
CHF 100,000
CHF 250,000
CHF 500,000
CHF 1,000,000
Single person
1'457.55 CHF
CHF 4'620.85
CHF 16,725.40
39,272.85 CHF
CHF 84,957.70
Married person
464.70 CHF
CHF 3,126.60
CHF 14,622.80
CHF 35,746.50
CHF 80,379.30
2. Canton of Vaud, municipality of Lausanne
Withdrawal amount
CHF 50,000
CHF 100,000
CHF 250,000
CHF 500,000
CHF 1,000,000
Single person
CHF 1'690.60
4,658.85 CHF
CHF 17,552.35
CHF 42,172
90,781.30 CHF
Married person
CHF 1'345.55
3,691.15 CHF
15,236.15 CHF
CHF 38,187.15
87,097.50 CHF
Single-parent family
1'502.95 CHF
CHF 4,098.50
CHF 16,390.70
CHF 40,469.65
CHF 89,399.95
3. Canton of Valais, municipality of Sion
Withdrawal amount
CHF 50,000
CHF 100,000
CHF 250,000
CHF 500,000
CHF 1,000,000
Single person
CHF 2,185.55
CHF 4,760.45
CHF 14,483.20
38,041.30 CHF
CHF 103,000
Married person
CHF 2,100.40
CHF 4,498.60
CHF 14,052.20
CHF 37,171.15
CHF 101,400
4. Canton of Fribourg, municipality of Fribourg
Withdrawal amount
CHF 50,000
CHF 100,000
CHF 250,000
CHF 500,000
CHF 1,000,000
Single person
986 CHF
CHF 3,260
CHF 17,483
CHF 46,583
CHF 104,000
Married person
762 CHF
CHF 2,723
CHF 16,362
45,362 CHF
CHF 103,100
The different cantonal calculation methods
The taxation of lump-sum benefits from pension plans is calculated differently from one canton to another. There are 4 main calculation methods.
1. Method proportional to the income tax rate
This method applies a fraction of the ordinary income tax rate. In practice, the tax on lump-sum pension benefits corresponds to a portion of the tax that would have been owed if the amount had been regular annual income.
For example, if the tax rate for an income of 250,000 CHF is 15%, the canton will apply 1/5 of that rate (i.e., 3%) to the withdrawn capital. This is why it is referred to as a “reduced tax.” The reduction varies by canton (generally 1/3, 1/4, or 1/5 of the normal rate).
Cantons concerned: Swiss Confederation, Aargau (AG), Appenzell Inner-Rhodes (AI), Geneva (GE), Lucerne (LU), Neuchâtel (NE), Nidwalden (NW), Obwalden (OW), Schaffhausen (SH), Solothurn (SO), Vaud (VD) and Zug (ZG)
2. Pension-rate system
This method is more complex. The canton first converts the capital into a fictitious annual pension using a conversion rate. It then determines the tax rate that would apply to this annual pension according to the income tax scale. Finally, that rate is applied to the total amount of capital withdrawn.
For example, for a withdrawal of 250,000 CHF with a coefficient of 1/25, a fictitious pension of 10,000 CHF is first calculated. If the tax rate for 10,000 CHF of income is 2%, that 2% rate is then applied to the 250,000 CHF of capital.
Cantons concerned: Graubünden (GR), Schwyz (SZ), Ticino (TI), Valais (VS) and Zurich (ZH)
3. Separate tax scale for lump-sum benefits
These cantons have created a specific and independent tax scale for lump-sum pension benefits, completely separate from the regular income-tax scale. This progressive scale is written directly into their cantonal tax law.
This method offers complete transparency, since the scale is specifically designed for capital withdrawals and not derived from other calculations.
Cantons concerned: Appenzell Ausserrhoden (AR), Bern (BE), Basel-Landschaft (BL), Basel-Stadt (BS), Jura (JU) and Zug (ZG)
4. Fixed rate for lump-sum benefits
These cantons apply the simplest method: a fixed tax rate on the entire lump-sum benefit, regardless of the amount withdrawn. The rate remains the same whether you withdraw 50,000 CHF or 1,000,000 CHF.
In these cantons, the slight increase visible in the comparisons comes solely from the federal tax, which remains progressive. At cantonal level, the rate remains fixed.
Cantons concerned: Glarus (GL), St. Gallen (SG), Thurgau (TG) and Uri (UR)
Important notes
- Some cantons apply minimum or maximum tax rates to avoid extreme situations.
- Some cantons (AG, BE, BS, FR, GR, VS) offer tax-free amounts.
- Ticino and Valais use conversion tables that take gender and age into account, as these factors influence the calculation of the notional pension.
How can I save tax on a BVG/LPP withdrawal?
The LPP capital tax is progressive: the larger the lump-sum withdrawal, the higher the effective tax rate. The golden rule is to spread out withdrawals so that each one is taxed at a lower rate.
Another option is to legally establish residence in a canton with favorable tax conditions in the year of withdrawal. The tax domicile must be genuine and recognized by the cantonal authorities. Each canton applies its own tax scale on capital benefits, and the differences are significant: some cantons (Zug, Obwalden, Schwyz) have much lower rates than others (Vaud, Geneva, Neuchâtel).
Withdrawal of the 2nd pillar for cross-border commuters
1. Social security contributions: when they apply
When a French resident is affiliated with the general social security system (unemployment, employment in France, self-employment in France, or receiving a French pension), the withdrawn 2nd-pillar capital is subject to social contributions.
The rate depends on the tax reference income from two years earlier, but in practice, nearly all taxpayers end up at the maximum rate, which pushes the social contribution burden close to 9%.
The amounts to be declared appear in the usual boxes dedicated to foreign-source income, and must be reported gross, without subtracting the withholding tax paid in Switzerland.
2. Taxation of capital in France
There are two mechanisms for taxing capital in France.
1. The flat-rate tax (optional): Swiss pension capital can be taxed through a specific levy of 7.5%, applied after a 10% deduction. This system is advantageous because the taxation is final and separate from the rest of the income. The option is irrevocable.
The sensitive point concerns “fractioning.” The tax authorities consider a split payment to be a voluntary choice to spread the withdrawal of the capital, which would prevent the application of the flat-rate tax.
However, for the Swiss 2nd pillar, cases where the taxpayer genuinely chooses to split the payment are extremely rare. French authorities now consider withdrawals linked to a property purchase or to a standard early withdrawal as each being an independent event, which makes it possible to use the flat-rate tax multiple times for withdrawals triggered by different reasons.
2. The progressive scale (default): If the withdrawal falls into a situation considered as split, the capital is added to the household’s income and taxed according to the standard brackets.
An attenuation mechanism (the quotient) is possible: only 1/4 of the capital is included in the income, and then the additional tax is multiplied by four. This limits the bracket jump but remains less advantageous than the flat-rate tax in most cases.
3. CMU contributions
For cross-border workers or retirees covered by the CMU/CNTFS, the 2nd-pillar capital is included in the income base used to calculate the contributions. In other words, the withdrawal increases the income taken into account by the CNTFS two years later, which can trigger a very high contribution (approx. 8% of the income).
The CNTFS systematically checks declarations: failure to declare capital never escapes automatic correction.
The only possible lever is to change health-insurance regime (switch back to LAMal or enroll in the French mandatory system) before the year in which the CNTFS factors the capital into its calculation.
4. Overall consequences for a cross-border commuter
When a French resident withdraws their 2nd pillar after having worked in Switzerland, the charges add up: Swiss withholding tax, then French taxation (flat-rate or progressive scale), then social contributions, and finally, for those under the CMU, an additional contribution two years later. In the end, the total burden easily reaches around 15 to 16% and can even exceed that level depending on the health-insurance regime, timing of the withdrawal, and tax income.
For a capital of 200,000 CHF, a typical cross-border worker ends up, for example, with a combined tax burden of around 32,000 CHF: about 12,000 CHF of withholding tax depending on the canton, around 13,500 CHF from the French flat-rate tax (after the 10% deduction), plus roughly 6,000 to 7,000 CHF in social contributions if their tax income does not qualify them for the reduced rate. If the person is also affiliated with the CMU, the contribution calculated two years later can add several more thousand francs to the bill.
It is this accumulation, and not a single tax, that explains why withdrawing from the 2nd pillar, once back in France, is far more costly than many anticipate.
Optimizing tax on 2nd pillar capital
1. Stagger the withdrawals
The progressiveness of the tax is the most significant optimization lever. The higher the amount withdrawn at once, the higher the effective tax rate becomes. By splitting the withdrawals, each payment is taxed at a lower rate.
Here are the staggering strategies to set up:
- Separate 2nd and 3rd pillar A withdrawals over several fiscal years
- For example, first remove the pillar 3a at age 60, then the BVG/LPP at age 65
- If you have several 3a accounts, withdraw them over separate years
- For couples, coordinate withdrawals of both spouses in separate years
- In case of vested benefit accounts, make split between 2 foundations on opening to defer withdrawal
For example, a single withdrawal of 500,000 CHF in Geneva is taxed at around 7.8%, which equals 39,000 CHF. By splitting this amount into two withdrawals of 250,000 CHF spaced one year apart, the rate drops to about 5.7% per withdrawal, for a total of 28,500 CHF in tax. The resulting savings amount to 10,500 CHF.
2. Select withdrawal canton
The tax residence at the time of the withdrawal determines the applicable tax rate. The differences between cantons are substantial, with gaps that can exceed 5 percentage points for the same amount.
However, for a change of canton to be recognized for tax purposes, the move must be genuine and the new residence established before the withdrawal. The tax authorities verify the reality of the relocation (rental contract, municipal registration, deregistration from the previous canton). This strategy requires advance planning and represents a significant personal commitment, but it can generate substantial savings on large capital amounts.
3. Optimize BVG/LPP buy-backs
Buy-ins to the 2nd pillar are 100% deductible from taxable income, which creates an immediate tax saving. This deduction is applied at the marginal tax rate, which can reach 40–45% in some cantons for high earners.
Rules to follow:
- Do not withdraw capital within 3 years following a buy-in, under penalty of tax assessment
- Plan redemptions according to the withdrawal date planned
- Give preference to redemptions during years of high income to maximize tax savings
Make regular buy-ins during your working life (especially after age 50), while respecting the 3-year waiting period before any early withdrawal. This reduces income tax during working years while building capital that will be taxed more favorably at the time of withdrawal.
4. Choosing the right time for withdrawal
The timing of the withdrawal can influence the overall tax burden, particularly for cross-border commuters or people with variable incomes.
Things to consider:
- Withdrawing capital in a year when others revenues are low (particularly in the year following cessation of activity)
- For French cross-border commuters: prefer to withdraw before returning permanently to France to avoid cumulative taxation
- Coordinate with other events (property sale, inheritance) to avoid unfavorable cumulation
Conclusion
The tax optimization of a 2nd-pillar withdrawal requires early planning, ideally 5 to 10 years before the withdrawal. The potential gains can reach several tens of thousands of francs on a large capital. This approach fits naturally into a broader estate-planning strategy, which considers all your financial and inheritance objectives.
Feel free to consult a financial advisor to develop a personalized strategy tailored to your situation.
Frequently asked questions
Capital benefits tax is due when you withdraw assets from your 2nd pillar, a vested benefits account, or your pillar 3a. This withdrawal can occur in several situations:
You're off to retirement and request all or part of the capital instead of an annuity.
You buy or renovate your house with your pension assets.
You become self-employed and leave the occupational pension plan.
You leave definitively Switzerland, under certain conditions.
You receive a capital in the event of divorce or asset sharing.
You become invalid and receive a lump-sum benefit.
You inherit a BVG capital inheritance following a death.
In all these cases, the capital is taxed separately at a reduced rate by the federal government, the canton, and the municipality, and even by the church if you are affiliated with it.
After a voluntary purchase in your 2nd pillar, you cannot withdraw this amount as capital for 3 years. If you make a withdrawal before the expiry of this period, the tax authorities will cancel the tax deduction you have benefited from and issue a tax reminder.
The 2nd pillar capital must be withdrawn all at once, however, it is possible to:
- Withdraw a portion as a lump sum at retirement and receive the remainder as an annuity
- Separate 2nd and 3rd pillar withdrawals over different years
- Make an early withdrawal to buy a home, then withdraw the balance at retirement
Monthly pension : taxed as an ordinary income to declare on your tax return.
Lump-sum payment (lump-sum or early payment) : subject to a capital gains tax, at a reduced rate and separate from income.
You must announce the received amount to your cantonal tax authorities if you live in Switzerland. The tax will be calculated according to a scale applicable to capital benefits (1/5 of the tax rate).
2nd pillar (occupational benefits):
- Employee contributions and voluntary buy-backs are deductible.
- Indicate them on your tax return.
3rd pillar A (tied personal pension provision):
- Contributions are deductible in the legal limit, depending on whether or not you are affiliated to the 2nd pillar.
If you are leaving Switzerland permanently, you can apply for early withdrawal of your 2nd pillar, but the conditions vary depending on your country of destination:
- Departure outside the EU/EFTA: you can withdraw your entire LOB credit
- Departure within the EU/EFTA: only the extra-mandatory portion can be withdrawn; the mandatory portion remains locked in until retirement
Tax is deducted at source in Switzerland at the time of withdrawal, in accordance with the tax rates applicable in the canton where your pension fund is located. Please also check the tax treaties between Switzerland and your country of destination to avoid double taxation.
When BVG capital is paid out to beneficiaries following a death, two taxes apply:
- Tax on capital benefits: calculated as for a conventional withdrawal
- Inheritance tax: according to cantonal legislation and relationship to the deceased
In most cantons, the spouse and direct descendants are exempt from inheritance tax. Other beneficiaries (partners, siblings, etc.) may be subject to significant inheritance charges.
