Pension fund buy-ins before moving abroad

Introduction

In its decision of February 21, 2025 (9C_349/2024), the Swiss Federal Court reaffirmed the limits of tax deductibility for pension fund buy-ins made before a definitive departure abroad. This decision highlights the strict criteria applied to prevent tax evasion and underscores the importance of transparent tax planning.

Context

In the present case, a French taxpayer residing in Switzerland between 2008 and 2012 and then again from 2014 to 2021 made pension fund buy-ins totalling CHF 241,500 before permanently leaving the country to settle abroad. These funds were transferred to vested benefits accounts in cantons offering favourable tax rates between July 2021 and September 2021. The tax authorities rejected the tax deduction on her 2021 return, arguing that these buy-ins constituted an attempt at tax evasion.

Core of the dispute

The dispute revolves around the tax deductibility of pension fund buy-ins made in 2021 by the appellant, totalling CHF 241,500. These buy-ins occurred just before her departure from Switzerland in September 2021. The cantonal judges highlighted several factors that led them to refuse the tax deduction and consider the transaction as an attempt at tax evasion:

The appellant was aware she was leaving Switzerland and terminating her employment relationships, as well as her ties to the pension fund.
The transfer of funds to vested benefits accounts in a canton with advantageous taxation suggested an intention to benefit from favourable taxation upon withdrawal.
The amount of buy-ins in 2021 was abnormally high compared to much lower amounts in previous years (between CHF 20,000 and CHF 60,000).
The adopted strategy would have allowed a significant tax saving (CHF 74,860), which constitutes a substantial economy.

It is important to note that the lack of evidence demonstrating a tangible intention to return to Switzerland in 2025, to continue contributing to professional pension plans, was a decisive factor in this decision. A mere intention to return to Switzerland was deemed insufficient to demonstrate that the departure was only temporary, allowing for future contributions to Swiss pension schemes.

Conclusion and practical recommendations

This decision by the Federal Court confirms and reinforces previous jurisprudence regarding pension fund buy-ins. It highlights that such buy-ins may be considered as tax evasion when a departure from Switzerland is planned or ongoing, in the absence of a clear intention to return (definitive departure).

However, in our view, it should still be possible to defend the tax deductibility of a buyback, provided that the taxpayer can convincingly demonstrate that at the time of the transaction, they had neither knowledge nor intention of leaving Switzerland, and that the buyback had a legitimate pension purpose.

The deduction of a buyback made solely for tax optimization purposes, without any real connection to Swiss pension schemes, should not be allowed.