Divorce and LPP buybacks

This new Federal Court ruling has a déjà vu feel about it. Hammering the point home a bit more feels good 👇

👉 The taxpayer divorced in June 2015 at the age of 62. Their pension assets were divided between them and their spouse. Between 2016 and 2019, the taxpayer made contributions totalling approximately 80% to cover the pension shortfall resulting from the divorce. On 1 August 2019, the taxpayer retires (i) in the form of a lump-sum payment for less than 10% of their pension assets (and more than the disputed top-up) and (ii) in the form of a pension for 90% of their pension assets.

The tax authorities refuse to take into account the 2019 buy-back when deducting from taxable income. The appeals commission and the cantonal court rule in favour of the tax authorities.

👉 The cantonal judges had held (para. 4.1.): The taxpayer divorced shortly before reaching the standard retirement age. He immediately set about rebuilding part of the pension assets that had been divided up during the divorce. His top-ups in 2019 were made between 4.5 and 6.5 months before he retired. The lump-sum benefit is 20% higher than the disputed top-up. The taxpayer worked for 18 months beyond the standard retirement age.

Federal judges remind that in the event of divorce, the three-year blocking period (Art. 79b LPP) before retirement in the form of a lump sum payment does not apply (consideration 3.3.).

They are still looking into tax evasion, specifically whether the taxpayer has committed an abuse of rights.

One should not compare the latest withdrawal and the capital withdrawal amount, but the total sum of withdrawals. It would be possible to focus on the latest withdrawal if there had been no withdrawals or only insignificant withdrawals just before retirement (and the final large withdrawal).

The conditions for admitting tax evasion in connection with Art. 79b LPP are restrictive and would only be met in exceptional circumstances (recital 4.2 i.f.).

This is a Bernese case. The judgment is in German.

TF, judgment 9C_206/2024, of 30 January 2025