What happens with the WEF advance payment when selling a house?

The 3-point orientation

When selling a house, a WEF advance payment from the 2nd pillar must usually be repaid to the current pension fund or a vested benefits institution. The reason for this is the sale restriction entered in the land register, which ensures that pension funds continue to serve the precautionary purpose. After repayment, the capital withdrawal tax paid in advance can be recovered within a period of time.

The principle: The WEF advance payment must be repaid when selling

A WEF advance payment is used to promote home ownership. This means that funds from occupational benefits may be used to buy, build or amortize a mortgage in owner-occupied residential property. However, the purpose is clearly limited. The money should not be permanently freely available, but should remain tied to owner-occupied residential property.

If the house is sold later, this purpose is generally omitted. For this reason, the amount withdrawn in advance must generally be repaid to the pension fund. The repayment ensures that the capital is back in the 2nd pillar and is used for subsequent retirement planning.

This is important for sellers because the sales proceeds are not completely freely available. For example, anyone who has withdrawn 120,000 francs from the pension fund usually has to return this amount back to retirement provision when selling. Only the remaining net proceeds can be freely used, provided that there are no further obligations such as mortgages, taxes or sales costs.

Why is there a sale restriction in the land register?

In the case of a WEF advance withdrawal, a sale restriction in accordance with BVG is usually noted in the land register. This note serves as backup. It shows that the property was financed with pension funds and cannot easily be sold without involving the pension fund.

The land register note does not necessarily prevent the sale itself, but it ensures that the advance withdrawal is taken into account in the sale. The land registry office, the notary's office, the bank and the pension fund must therefore be coordinated at an early stage. Without confirmation of the repayment, the sale restriction cannot be cleanly deleted.

In practice, it usually works like this: When selling, the mortgage is repaid first from the sale proceeds. The WEF repayment amount owed is then transferred to the pension fund or vested benefits institution. As soon as the pension fund confirms the repayment, the note in the land register can be deleted.

How does the repayment work in practice?

The repayment should not only be organized on the day of the transfer of ownership. Anyone who wants to sell a house should inform the pension fund at an early stage and clarify what amount is to be repaid. Depending on the pension fund, forms, payment details, confirmations and coordination with the notary's office are required.

The process is typically clearly structured: First, the outstanding WEF amount is determined. As part of the sales process, it is then regulated by which means the repayment will be made. The amount is often transferred directly from the sale proceeds to the pension fund. The latter then issues a confirmation so that the sale restriction can be deleted.

It is important that the repayment is not simply made to a private account. The money must be returned to occupational benefits. If the selling person is still insured with a pension fund, the repayment is usually made there. If there is no longer an active pension fund, a vested benefits institution may be responsible.

What happens if the sales revenue is not enough?

Not every house sale results in a high profit. Sometimes, after repayment of the mortgage, deduction of sales costs and settlement of further obligations, the sale proceeds are lower than expected. The question then is whether the entire WEF advance payment still has to be repaid.

In principle, there is a repayment obligation. In practice, however, the actual revenue available is relevant. If, after deduction of mortgage liabilities and sales-related costs, the sale proceeds are insufficient, the repayment may be limited to the amount available. The specific case and the settlement with pension fund, bank and notary office are decisive.

This is precisely why early sales planning is important. Before signing the purchase contract, owners should have it calculated how much is actually left after mortgage, brokerage commission, property gains tax, notary fees and WEF repayment. The gross selling price says little about how much the free net revenue is at the end.

What applies when buying a new home?

Many owners do not sell to get out of home ownership, but to buy a new house or apartment. The question then is whether the WEF advance payment can be transferred directly to the new object.

In certain cases, it is possible to purchase a replacement. This means that the pension funds are retained for the purpose of the owner-occupied property by being used for a new home. To do this, the requirements for home ownership promotion must continue to be met. As a rule, the new property must in turn be occupied by yourself and serve as the main residence.

However, you shouldn't assume that everything will continue automatically. The pension fund, bank, notary office and land registry office must accept the settlement and document it correctly. Depending on the timeline, it may be necessary to repay the advance payment first and then reuse it for the new object. Anyone who combines sale and purchase should therefore clarify the financing with the pension fund particularly early on.

Taxes: What happens with the paid capital withdrawal tax?

In the case of the original WEF advance withdrawal, a separate capital withdrawal tax was levied in Switzerland. If the advance payment is repaid later, this tax can in principle be recovered. This is an important point that is often forgotten when selling.

The recovery is not automatic. The insured person must submit an application to the competent tax authority. As a rule, the authority that collected the tax when withdrawing in advance is responsible. The application must be accompanied by confirmation of repayment and further documents.

The deadline is important: The recovery must be made within the legally prescribed period. If you wait too long, you may lose your claim. Therefore, tax recovery following WEF repayment should be organized immediately after repayment. It is not about a tax on the sale of a house, but about the tax that was paid back then on the pension withdrawal.

WEF advance withdrawal and property gains tax

WEF advance withdrawal is to be differentiated from property gains tax. property gains tax concerns the profit from the sale of the property. The WEF advance payment concerns financing with pension funds and their return to occupational benefits.

The repayment of the WEF advance payment does not automatically reduce the real estate profit. Sales price, purchase price, value-adding investments and deductible sales costs are particularly relevant for property gains tax. The advance payment was a source of financing, not an additional purchase price.

Nevertheless, the WEF advance withdrawal significantly influences liquidity when selling. Anyone who has to repay the advance payment and at the same time bears property gains tax, mortgages, early repayment penalties or brokerage costs should plan the funds carefully. It may happen that the taxable profit is high, although the free cash inflow is significantly smaller after repayment of the advance payment.

What happens when pledging instead of advance payment?

It is important to distinguish between advance payment and pledge. In the case of an advance withdrawal, capital from the pension fund was actually paid out and invested in residential property. In the case of a pledge, the pension capital generally remains in the pension fund, but serves as security for the bank.

When selling a property with pledged pension funds, there is therefore no need to automatically repay a disbursed amount because no capital has been withdrawn. However, the bank and pension fund must clarify whether the deposit can be lifted. The effects are therefore different from the classic WEF advance payment.

For owners, this distinction is key. Many people generally say that they have “used” pension fund funds. When selling a house, however, it makes a big difference whether an advance payment was actually made or only a pledge exists.

Which bodies need to be notified?

When selling a property with WEF advance payment, several agencies should be informed early on. These include the pension fund or vested benefits institution, the financing bank, the notary office, if applicable, the land registry office and the tax authority.

The pension fund must know that a sale is planned and confirm the amount to be repaid. The bank must coordinate mortgage repayment. The notary office must ensure that the purchase price is correctly distributed and that the land register notice can be deleted. The tax authority will later be relevant for the recovery of capital withdrawal tax.

The better these agencies work together, the smoother the sale process. Delays often occur when the WEF issue only becomes apparent shortly before the notary appointment. Sellers should therefore check whether there is a WEF note in the land register before marketing.

Common mistakes when selling a house with WEF advance payment

A common mistake is forgetting the WEF advance payment when calculating sales revenue. Owners see the selling price, withdraw the mortgage and believe the rest is freely available. If the advance payment still has to be repaid afterwards, the liquidity planning can suddenly no longer work out.

A second mistake is late informing the pension fund. Without a repayment confirmation, the cancellation of the sale restriction may become problematic. This can delay sales or make processing unnecessarily complicated.

A third mistake concerns taxes. Many owners do not know that, after repayment of the WEF advance payment, they can reclaim the capital withdrawal tax paid at that time. Anyone who misses the deadline may give away several thousand francs.

Conclusion: WEF advance payment is an early part of sales planning

The answer to the question What happens with the WEF advance payment when selling a house? is: The amount withdrawn in advance must generally be repaid to the pension fund or a vested benefits institution. The reason for this is that pension funds are earmarked and should not remain freely available permanently when sold.

The repayment is closely linked to the sale restriction in the land register. Only when the repayment has been confirmed can this note be deleted and the sale completed cleanly. When procuring a replacement, special processing may be possible, but it should be clarified with the pension fund, bank and notary office at an early stage.

Sellers should therefore include the WEF advance payment in the net revenue statement from the outset. In addition to mortgage, brokerage fees, property gains tax and notary fees, sales planning also includes the repayment of retirement savings. Anyone who coordinates in good time avoids delays and can also reclaim the capital withdrawal tax paid after repayment.

WEF advance payment glossary when selling a house

WEF advance payment: Early withdrawal of retirement benefits from occupational benefits to finance owner-occupied residential property.

Sale restriction: Land register note which ensures that a property financed with pension funds is not sold without repayment of the advance payment.

Free movement scheme: Pension fund for people without a current pension fund, for example in the event of a change of job, self-employment or employment interruption.

Capital collection tax: Tax that was charged when retirement capital was originally withdrawn and can be recovered after repayment of the WEF advance payment.

Replacement purchase: Use of tied pension capital for a new owner-occupied home following the sale of the previous property.