Change of domicile after retirement

Moving house after retirement – things to consider

The kids have moved out; the family home has become too big. As retirement approaches, many couples start to focus on moving to a smaller, age-appropriate home. If you'll be retiring soon, you should obtain detailed information about the financial consequences of moving your domicile to another canton.

Cheap condominium but higher taxes in another canton

Looking after their large single-family dwelling and garden was becoming more and more of a burden for Julia and Patrick. Patrick was often away on business trips, and Julia worked in a travel agency. After the youngest daughter moved out, Julia proposed giving the house to the children and moving into a smaller apartment. Patrick could also envision moving after retirement in two years' time.

During their very first search on the internet, the couple found a condominium in a neighboring canton that they both really liked – and the price was particularly appealing. However, they couldn't quite believe their luck, so Julia suggested that they consult an expert. It turned out to be a good idea. The property was cheap, but the high local taxes would have dampened their joy at the latest when they received their next tax bill.

The tax consultant advised them against moving to a cheaper canton.

The tax consultant strongly advised them not to be enticed by the affordable sale price. He showed them that moving to a low-tax canton can be worthwhile even if the property is more expensive there. The savings on the withdrawal of pension capital and on income and asset tax in this specific case were so high that the extra costs of purchasing would be recouped after just a few years.

The consultation lasted just under an hour, but it was crucial in setting the course for the couple's next step in life. Patrick and Julia are now enjoying their retirement in a low-tax canton, where they live in a condimium that is just as good as the first property they looked at.

Five things to take into account if you move to another canton

  1. You are taxed in the location in which you live on December 31. If, for example, you move to another canton in November, you are subject to tax in this new canton, and you will pay tax there at the local rate for the entire calendar year.
  2. People subject to tax at source must inquire about their tax obligations at their new place of residence. The rules vary from canton to canton.
  3. In cantonal tax, lump-sum withdrawals from a pension fund or Pillar 3a account are taxed on the due date or payment date.
  4. The testator's last place of residence is used in the assessment procedure for inheritance taxes. The same also applies to gift tax: The place of residence of the donor counts in the case of donations and advancements. Cantonal tax rates vary hugely. The cantons of Obwalden and Schwyz don't levy inheritance and gift taxes.
  5. There is one exception in the case of inheritance and gift tax. Real estate is taxed in the canton in which it is located.