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Old 19.04.2012, 14:27
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US TAX on Swiss Pensions

Does anybody know if there is a tax treaty between Switzerland and US so the pension which I receive and pay tax in Switzerland does not also get taxed in US? A friend mentioned to me that there is a treaty and according to article 18, pensions get taxed only in the country where they originate. I am not sure if this is valid and I am also not sure what form do I need in order to declare my Swiss pension income. I think 1040 for sure but what other form do I need in order to take the treaty exemption?
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Old 19.04.2012, 20:05
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Re: US TAX on Swiss Pensions

I don't know about the form, but we had to report it for FATCA.
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Old 22.04.2012, 13:40
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Re: US TAX on Swiss Pensions

Sorry to bump in but i would also like to know exaclty how to approach this problem. What happens when you take out money from your retirement account, how is this taxed by the IRS?
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Old 22.04.2012, 22:14
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Re: US TAX on Swiss Pensions

Nevermind FACTA- you'll have to report it if it's over $10k USD on the FBAR forms.

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I don't know about the form, but we had to report it for FATCA.
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Old 23.04.2012, 02:05
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Re: US TAX on Swiss Pensions

that might be true if it is pillar 2 and 3. If it's pillar 1, i think that's just social security, and not really held with a "financial institution." So, it can just go on 8938 but not FBAR.

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Nevermind FACTA- you'll have to report it if it's over $10k USD on the FBAR forms.
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Old 25.04.2012, 19:52
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Re: US TAX on Swiss Pensions

According to this, there is no need to report pillar 1 stuff neither on FBAR nor on 8938 (see last row)
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Old 25.04.2012, 20:13
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Re: US TAX on Swiss Pensions

No treaty to exempt employer paid pillar 2. It's taxable. It's a non qualifying pension plan and is deemed deferred compensation. The upside is your establishing a tax basis in the plan.
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Old 25.04.2012, 21:39
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Re: US TAX on Swiss Pensions

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No treaty to exempt employer paid pillar 2. It's taxable. It's a non qualifying pension plan and is deemed deferred compensation. The upside is your establishing a tax basis in the plan.
Could you explain your last bit there? Having just acquired my 2nd pillar payout, I'd like to know what my options are for reducing the tax I have to pay on this.
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Old 25.04.2012, 21:56
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Re: US TAX on Swiss Pensions

I think you are talking in crossed purposes, there are two issues here:

i. OP and last poster talk about withdrawals, presumably early, from pillar II, possibly also pillar I and III.

ii. JBZ is talking about swiss pension contributions, in particular, pillar II, and the taxabality of contributions, in particular the employer contributions.

For i., as another poster said, I believe pillar I seems to be covered by tax treaty. For Pillar II, and possibly III, I am not sure, but use the search function as I am sure they have already been discussed on the EF before.

For ii, JBZ is correct from the information I have also received from a tax lawyer.
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Old 26.04.2012, 07:53
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Re: US TAX on Swiss Pensions

Thank you all for the feed back on this issue. It seems that there are various opinions on Re:matter. I did a web search on various forums and I am concluding that the current treaty of taxation between US and Switzerland article 18 clearly states the following which makes all type of Swiss pensions exempt from us tax:Pensions and Annuities
1. Subject to the provisions of Article 19 (Government Service and Social Security), pensions
and other similar remuneration beneficially derived by a resident of a Contracting State in
consideration of past employment shall be taxable only in that State.
2. Subject to the provisions of Article 19 (Government Service and Social Security),
annuities derived and beneficially owned by a resident of a Contracting State shall be taxable
only in that State. The term “annuities” as used in this paragraph means a stated sum paid
periodically at stated tines during a specified number of years or for life under an obligation to
make the payments in return for adequate and full consideration (other than services rendered).
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Old 26.04.2012, 09:08
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Re: US TAX on Swiss Pensions

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Thank you all for the feed back on this issue. It seems that there are various opinions on Re:matter. I did a web search on various forums and I am concluding that the current treaty of taxation between US and Switzerland article 18 clearly states the following which makes all type of Swiss pensions exempt from us tax:Pensions and Annuities
1. Subject to the provisions of Article 19 (Government Service and Social Security), pensions
and other similar remuneration beneficially derived by a resident of a Contracting State in
consideration of past employment shall be taxable only in that State.
2. Subject to the provisions of Article 19 (Government Service and Social Security),
annuities derived and beneficially owned by a resident of a Contracting State shall be taxable
only in that State. The term “annuities” as used in this paragraph means a stated sum paid
periodically at stated tines during a specified number of years or for life under an obligation to
make the payments in return for adequate and full consideration (other than services rendered).
Apologies, I jumped the gun on understanding what you meant and went down the route of employer paid contributions to pillar 2 pension plan of which my comments were accurate.

In any case, article 18, as you clearly state, is subject to the provisions of article 19, did you read that?

For your ref:
1.
ARTICLE 19
Government Service and Social Security
a) Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:
i) is a national of that State; or
ii) did not become a resident of that State solely for the purpose of rendering the services.
2.
a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.


3. The provisions of Articles 15 (Dependent Personal Services), 16 (Directors’ Fees) and 18 (Pensions and Annuities) shall apply to salaries, wages and other similar remuneration, and to pensions, in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.
4. Notwithstanding paragraph 2, social security payments and other public pensions paid by a Contracting State to an individual who is a resident of the other Contracting State may be taxed in that other State. However, such payments may also be taxed in the first Contracting State according to the laws of that State, but the tax so charged shall not exceed 15 percent of the gross amount of the payment.
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Old 26.04.2012, 15:43
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Re: US TAX on Swiss Pensions

Article 19 the way I read it strictly applies to Government Service and Social Security. By the way I wish they were writing all these treaties in a normal down to earth language for mortals. Anyhow is common sense that any type of pension should be taxed only in one country. However having said that in Switzerland we also pay wealth tax which taxes all assets including worldwide pensions.
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Old 26.04.2012, 15:58
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Re: US TAX on Swiss Pensions

Hi Apollo55,
If you qualify to exclude the pension from US taxation you would disclose same on Form 8833. I hope this helps.

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Does anybody know if there is a tax treaty between Switzerland and US so the pension which I receive and pay tax in Switzerland does not also get taxed in US? A friend mentioned to me that there is a treaty and according to article 18, pensions get taxed only in the country where they originate. I am not sure if this is valid and I am also not sure what form do I need in order to declare my Swiss pension income. I think 1040 for sure but what other form do I need in order to take the treaty exemption?
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Old 26.04.2012, 16:09
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Re: US TAX on Swiss Pensions

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Article 19 the way I read it strictly applies to Government Service and Social Security. By the way I wish they were writing all these treaties in a normal down to earth language for mortals. Anyhow is common sense that any type of pension should be taxed only in one country. However having said that in Switzerland we also pay wealth tax which taxes all assets including worldwide pensions.
I am of the opinion it should be reported.
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Old 26.04.2012, 16:21
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Re: US TAX on Swiss Pensions

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Could you explain your last bit there? Having just acquired my 2nd pillar payout, I'd like to know what my options are for reducing the tax I have to pay on this.
You would have established tax basis in your contributions as you report gross salary on US TR So, you, your accountant need to establish what element of distribution was your contributions.

Note: Risk element should not be included in basis. As the risk is insurance, only payable if something happens to you right?

Assuming you have been reporting your employer paid contributions, either as non qualifying income as part of line 7, but often also reported as misc income on line 21, then you will have paid tax on thos contributions reported also.

If you have used an accountant to prepare US taxes, they should have been doing this, and attaching an appendix/statement to the TR to track this. Again, Risk element of contr. should not be included as part of basis.
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Old 02.10.2012, 17:16
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Re: US TAX on Swiss Pensions

What happens if you have been told by your pension plan operators that you are in a US qualified plan, and it is deemed to be not qualified by IRS?

Should you restate all of your tax returns for employee and employer contributions? if so for how long??
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Old 02.10.2012, 17:54
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Re: US TAX on Swiss Pensions

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What happens if you have been told by your pension plan operators that you are in a US qualified plan, and it is deemed to be not qualified by IRS?

Should you restate all of your tax returns for employee and employer contributions? if so for how long??
Very few plans outside the US qualify. Do you have literature claiming the plan to be US qualified? Or was this verbally informed?

You could go back and amend your returns if you wanted to. Some may even advise this. The law may even stipulate this.

However, it would be far more logical to just correct the non wilful error going forwards, and keep a track of basis. Essentially, the only difference is your non taxable basis will be smaller than it would of been otherwise, if reported from start.

I assume you have been reporting your salary gross on the US TR? I.e. pre pension and social deductions? which is correct by the way. The reason I ask, is then you have reported your own contirbutions to the pension plan, just not your employers by all accounts. So be sure to include YOUR contributions into tracking basis.
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Old 02.10.2012, 18:34
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Re: US TAX on Swiss Pensions

I have an email from my pension plan that told me it was qualified that I got 2 years ago.

This year I have to fill in the new IRS form, and I asked for an official mail from the pension plan on qualified status. I am still waiting, but the person who sent me the email is no longer with the firm.

They are getting an official analysis done but I am not sure the response will be the same. They agree I received the email from the representative but do not know if he checked with the expert two years ago.

I have declared all income to IRS.. I have 2 accountants. one in the US and one in Europe (who is expert on swiss accounts/US law) I had been told that the recent tax treaty with the US was beneficial regarding pension (bilateral agreement)

To all accountants I give all forms I receive from company and declare Gross and Net income. I was originally on relocation and then went permanent and had my taxes done with one of the large international tax firms. I was never told anything regarding reporting differently the pension contributions.

Are employer contributions normally included in gross salary in switzerland?

This is very frustrating as I have tried to always be compliant and spend thousands on accountants each year for taxes.
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Old 02.10.2012, 18:50
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Re: US TAX on Swiss Pensions

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I have an email from my pension plan that told me it was qualified that I got 2 years ago.

This year I have to fill in the new IRS form, and I asked for an official mail from the pension plan on qualified status. I am still waiting, but the person who sent me the email is no longer with the firm.

They are getting an official analysis done but I am not sure the response will be the same. They agree I received the email from the representative but do not know if he checked with the expert two years ago.

I have declared all income to IRS.. I have 2 accountants. one in the US and one in Europe (who is expert on swiss accounts/US law) I had been told that the recent tax treaty with the US was beneficial regarding pension (bilateral agreement)

To all accountants I give all forms I receive from company and declare Gross and Net income. I was originally on relocation and then went permanent and had my taxes done with one of the large international tax firms. I was never told anything regarding reporting differently the pension contributions.

Are employer contributions normally included in gross salary in switzerland?

This is very frustrating as I have tried to always be compliant and spend thousands on accountants each year for taxes.
I assume you are referring to Form 8938? Foreign Financial Asset Reporting.

If this is a Pillar 2 pension it never has been qualified. If it is a different type of pension plan, then potentially qualified, but unlikely unless a UK plan for exampl,e and thus probably bad advice.

You have reported all income you say, you mean, any interest bearing on the accounts? Just not the employer contribution?

Well in the US you declare gross, Swiss take net. Your personal pension contribution comes from your gross salary. So, by reporting gross salary on US TR, you have therefore reported your contributions as part of your gross salary. What you have failed to is input matching or increased contributions by employer.

The necessity to report these pension amounts has only recently become known for many firms. I believe big 4 since last year only.

No employer contributions wont be in your gross salary. They will either match your contributions or be more, and you need to request this from the plan. There will be risk contributions also, i.e. insurance, these do not form part of basis, as never technically paid out so shouldnt include the risk as basis. Which means you can actually include risk amounts in any foreign earned income exclusion. The non-risk is non qualfied income for earned income exclusion purposes.
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Old 11.02.2014, 16:04
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Re: US TAX on Swiss Pensions

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I don't know about the form, but we had to report it for FATCA.
This is strange. I asked PwC when completing my FBAR and they said no need to report the Pension Fund.
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