LPP withdrawal tax by canton: the gap map.
The canton that taxes your LPP withdrawal is the foundation's, not yours. The gap between cantons goes from one to three. Here is the scales map and the optimization strategy.
On an LPP withdrawal of CHF 500,000, the tax goes from ~CHF 25,000 in the cheapest cantons to ~CHF 65,000 in the most expensive. Sometimes the difference between a year of income and 18 months. Yet the rule is simple: it is the canton of the foundation that taxes, not yours. Which opens the door to a perfectly legal optimization.
Tax in two components
Every LPP capital withdrawal is subject to two taxes that add up:
- Federal direct tax (DBFTA) — national progressive scale, identical for all. On CHF 500,000, the federal tax is about 1 to 2% (average rates, calculated separately from income).
- Cantonal and communal tax — this is where gaps widen. Depending on the canton, the average rate on CHF 500,000 goes from ~3% to ~12%.
The total, federal + cantonal/communal, gives the "pension tax rate" usually quoted.
The cantonal ranking — 2024 brackets
| Canton | Indicative rate | Approximate tax |
|---|---|---|
| Schwyz (SZ) | ~5% | ~CHF 25,000 |
| Zug (ZG) | ~5% | ~CHF 25,000 |
| Nidwalden (NW) | ~5.5% | ~CHF 27,500 |
| Obwalden (OW) | ~6% | ~CHF 30,000 |
| Glarus (GL) | ~6% | ~CHF 30,000 |
| Appenzell IR (AI) | ~6% | ~CHF 30,000 |
| Vaud (VD) | ~7% | ~CHF 35,000 |
| Valais (VS) | ~7% | ~CHF 35,000 |
| Ticino (TI) | ~7% | ~CHF 35,000 |
| Zurich (ZH) | ~8% | ~CHF 40,000 |
| Berne (BE) | ~9% | ~CHF 45,000 |
| Geneva (GE) | ~10% | ~CHF 50,000 |
| Basel-City (BS) | ~12% | ~CHF 60,000 |
| Neuchâtel (NE) | ~13% | ~CHF 65,000 |
Visualization: three groups of cantons
Why the gaps are so large
Occupational pension is one of the rare taxes where cantons keep significant leeway. Three logics coexist:
- Financial-domicile cantons (Schwyz, Zug, Nidwalden): aggressive tax policy to attract headquarters and foundations. Low pension scales.
- Historic French-speaking cantons (Geneva, Vaud, Neuchâtel): more redistributive tax policy, medium-to-high pension scales.
- German-speaking urban cantons (Zurich, Basel-City): medium-to-high rates, calibrated in stages.
The optimization: prior transfer
You can transfer your vested benefits assets from one foundation to another, in any canton, at any time. This transfer is tax-neutral (FZG article 13). The source tax of the final withdrawal will depend on the foundation's canton at the time of payment, not the canton of origin.
Andreas has CHF 480,000 in a Zurich-domiciled foundation. He plans a capital withdrawal at 65. At 60, he transfers to a Schwyz foundation.
- LPP assets
- CHF 480,000
- Initial canton
- Zurich (~8%)
- Canton after transfer
- Schwyz (~5%)
- Tax if withdrawn in ZH
- ~CHF 38,400
- Tax after transfer to SZ
- ~CHF 24,000
- Net saving
- CHF 14,400 for an administrative transfer
Conditions to respect
| Criterion | Recommendation |
|---|---|
| Lead time before the withdrawal | 12 months minimum between the transfer and the withdrawal decision |
| Reason for the transfer | Justify by consolidation, lower fees, better offer — not by pure optimization |
| Documentation | Keep transfer correspondence, the reason, and the conditions of both foundations |
| Buy-back combination | LPP buy-back + capital withdrawal are not allowed within 3 years |
| Spreading withdrawals | Withdrawing across 2-3 different tax years can reduce progressivity |
The fiscal-residence trap
Many people think their canton of residence taxes. Wrong for LPP. The rule:
- The foundation's canton of domicile taxes at source at the time of payment.
- No credit or offset exists between Swiss cantons (unlike international ordinary income).
- If you live in Basel and your foundation is in Schwyz, Schwyz taxes.
Practical consequence: the choice of foundation canton is more important than your place of residence for this income type.
- 01The canton that taxes your LPP withdrawal is the foundation's, not your place of residence.
- 02On CHF 500,000 withdrawn, the gap between the most and least expensive cantons reaches CHF 30,000 to 40,000.
- 03The cheapest cantons: Schwyz, Zug, Nidwalden, Obwalden, Glarus (~5-6%).
- 04Optimize via prior transfer (12 months minimum before withdrawal, motivated) + spreading over several tax years.
To combine this optimization with LPP buy-backs, see our buy-back article. For retirement withdrawal timing, annuity vs lump sum. For EPL specifically, our EPL guide.