Using Swiss pension funds to buy property

Dear all

We are moving back to Spain and we would like to buy a property as a 1st. residence. Before that I will have the swiss passport. I would like to know if it is possible to use the 2nd pillar to buy a house as 1st residence in Spain.

Regards

Javier

Hi Javier. Yes, you can withdraw the mandatory part of your Swiss pension fund benefits to buy a primary residence in Spain. This is allowed. You apply to your vested benefits foundation for an early withdrawal to buy a home, just as you would if you were buying a home in Switzerland.

Normally, the money will need to be transferred to a blocked account from which it can only be used for financing a home (paying the down-payment or mortgage payments, etc.).

The non-mandatory part you can withdraw anyway when you leave Switzerland. You do not need to request an early withdrawal for a specific purpose. You may have non-mandatory pension savings if your employer paid more than the minimum required to your pension fund, or you made voluntary payments into your pension fund.

Moneyland has a good article covering this which I would recommend:
https://www.moneyland.ch/en/buy-property-swiss-pension-fund-pillar-3a-guide

Hello

My wife and I are looking to purchase our primary residence in France. I work on Geneva and have done so for the past 5 years. My wife does not currently work.

We’ve accumulated quite a bit of money in our Pillar 2 and also Pillar 3.

I understand both Pillar 2 and 3 can be used against the purchase of a primary residence, however I can’t seem to get clarity on using them to pay the notaire fee in France. I have one broker telling me no Pillars can be used and another saying Pillar 3 can be used

Any ideas? 
thank you

Generally the laws governing withdrawals to buy property are the same for the pillar 3a as for the pillar 2, unless a difference is clearly specified.

According to the rules, retirement savings can be used:

• To pay for the property
• To pay the downpayment for the mortgage
• To amortize a mortgage
• To pay for renovations which maintain the property's value
• To make improvements which increase the property's value
• To pay for housing cooperative shares
• To pay for shares from a housing corporation
• To lend money to a housing development company

There is a clear rule saving that capital withdrawal taxes cannot be covered by pillar 2 retirement savings. There is also a clear rule that notary fees cannot be covered by pillar 2 retirement savings. Given that I can't find any exceptions to those rules for the pillar 3a, it's safe to assume that the same applies to the pillar 3a.

The main pattern is that money from retirement savings should be converted into equity in a home. Money spent on taxes, notary fees, and the like does not build equity in a home.

Thanks very much for the explanation

I had a follow-up question

I am going to withdraw my Pillars 2 and 3 for the purchase of a house in France (I'll continue working in Switzerland). I'll submit the various documents to the Pension Foundations once I have them signed by the notaire. At this point, I will still be living in Switzerland though the money will be transferred to a notaire in France. I suspect I will move permanently to France in October.

Can you advise on the tax situation? Will the notaire receive the full amounts and I will then receive a follow-up tax bill from the Canton of Geneva? Or will a withholding tax be deducted from my Pillar 2 and 3, and the balance will be paid to the notaire?

We are also getting a mortgage, so I'm trying to calculate the amounts from the Pillars such that I can request the correct mortgage

Thank you very much in advance 

The general rule is:

The money can only be paid out when the property becomes your primary residence. Therefore, when withdraw Swiss pension benefits you buy a property outside of Switzerland, the Swiss withholding tax applies (in the canton where your pension fund is located). The money is taxable in your country of residence (France, in your case). You can reclaim the Swiss withholding tax by proving your tax residence in France.

So the Swiss withholding tax will be deducted, and the remaining balance will be paid out. I would highly recommend that you look into possible French taxes on the withdrawals, so that you can account for those in your calculations. The Swiss withholding tax is only temporary, as you can reclaim it.