Go Back   English Forum Switzerland > Help & tips > Finance/banking/taxation
Reply
 
Thread Tools Display Modes
  #1  
Old 18.02.2015, 12:30
Newbie
 
Join Date: Apr 2011
Location: Zurich
Posts: 4
Groaned at 1 Time in 1 Post
Thanked 3 Times in 3 Posts
jcvidal has no particular reputation at present
CH pension payout to a non-US citizen taxed in the US?

I know that similar questions were discussed over and over here, but I could not find any answer to my situation.
I am a non-US and non-Swiss citizen that will move to the US. I heard that once I get my 2nd pillar pension payout here in CH, the US will tax me on it as income?? Is that true? This does not make sense to me... Why would the US do it if the money was earned here and these are savings?
BTW, I never lived in the US before.
Any experiences to share?
Thanks!

Last edited by jcvidal; 18.02.2015 at 12:51.
Reply With Quote
  #2  
Old 18.02.2015, 20:43
Junior Member
 
Join Date: Jul 2014
Location: Valais
Posts: 88
Groaned at 0 Times in 0 Posts
Thanked 73 Times in 36 Posts
Potrzebie has become a little unpopular
Re: CH pension payout to a non-US citizen taxed in the US?

Quote:
View Post
I know that similar questions were discussed over and over here, but I could not find any answer to my situation.
I am a non-US and non-Swiss citizen that will move to the US. I heard that once I get my 2nd pillar pension payout here in CH, the US will tax me on it as income?? Is that true? This does not make sense to me... Why would the US do it if the money was earned here and these are savings?
BTW, I never lived in the US before.
Any experiences to share?
Thanks!
There are two separate issues here:

(1) The USA -- with its universalist exceptionalism -- taxes everybody within its bailiwick (citizens, residents, deemed residents, constructive residents...) on worldwide income.

(2) Every country may tax all income arising within its borders first.

HOWEVER, most tax treaties address at least some of the conflicts, usually because the constituency of the negotiating parties (national treasuries) has the ear of those negotiators: i.e. global corporations.

For a lot of reasons beyond the scope of this forum (one of which was the integration of US company pensions with social security) most modern US tax treaties address pensions and social security, and many give exclusive taxation rights to one of the signatory states, notwithstanding (and derogating from) item (1) above.

Thus:

<begin text>

ARTICLE 18
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).

<end text>

Whoever does your taxes will know how to handle this. If you do your own, perhaps with TurboTax, you may have to make a manual adjustment. (Professional tax preparers, if they use TurboTax (or another brand of software) themselves, have a model that isn't sold retail, that allows them to fix conflicts.)
Reply With Quote
This user would like to thank Potrzebie for this useful post:
  #3  
Old 18.02.2015, 22:41
Newbie
 
Join Date: Apr 2011
Location: Zurich
Posts: 4
Groaned at 1 Time in 1 Post
Thanked 3 Times in 3 Posts
jcvidal has no particular reputation at present
Re: CH pension payout to a non-US citizen taxed in the US?

Thanks for commenting on this. But it's still not clear to me the meaning of all of this
I am not an US citizen, not green card holder, never lived in the US before.
Why would US tax me on the money (pension) I earned in CH over the past years? Or won't they?
Reply With Quote
  #4  
Old 18.02.2015, 22:48
st2lemans's Avatar
Forum Legend
 
Join Date: Dec 2010
Location: Lugano
Posts: 18,066
Groaned at 924 Times in 720 Posts
Thanked 19,583 Times in 9,430 Posts
st2lemans has a reputation beyond reputest2lemans has a reputation beyond reputest2lemans has a reputation beyond reputest2lemans has a reputation beyond reputest2lemans has a reputation beyond reputest2lemans has a reputation beyond repute
Re: CH pension payout to a non-US citizen taxed in the US?

They shouldn't, as it's not income, and you didn't receive it while domiciled in the US.

However, if you take it as payments rather than lump sum, then it IS income and you will be taxed.

Tom
Reply With Quote
This user groans at st2lemans for this post:
  #5  
Old 18.02.2015, 22:57
Newbie
 
Join Date: Apr 2011
Location: Zurich
Posts: 4
Groaned at 1 Time in 1 Post
Thanked 3 Times in 3 Posts
jcvidal has no particular reputation at present
Re: CH pension payout to a non-US citizen taxed in the US?

Thanks Tom!
Funny because I got different opinions about the lump sum, people saying that I will be taxed on it... Which I don't agree because, as you said, I earned here and was not domicilied in the US
Confusing...
Reply With Quote
This user would like to thank jcvidal for this useful post:
  #6  
Old 19.02.2015, 00:58
BokerTov's Avatar
Forum Veteran
 
Join Date: Jul 2010
Location: USA, former Zurich
Posts: 1,809
Groaned at 11 Times in 11 Posts
Thanked 3,700 Times in 1,331 Posts
BokerTov has a reputation beyond reputeBokerTov has a reputation beyond reputeBokerTov has a reputation beyond reputeBokerTov has a reputation beyond reputeBokerTov has a reputation beyond reputeBokerTov has a reputation beyond repute
Re: CH pension payout to a non-US citizen taxed in the US?

Disclaimer: I am not a personal income tax expert. However, I am a US taxpayer.

Assuming you move to the US during fiscal year 2015, and we are talking about the 2015 U.S. tax return (which you will file in 2016) - the first thing you need to determine is whether you are a resident or non-resident alien for tax purposes for the year. Be careful, because the definition of resident alien for immigration purposes (green card) is not the same as the definition of resident alien for tax purposes. For example, you could be a non-resident alien (for example H1-B visa holder) for immigration purposes, but a resident alien for tax purposes.

For tax purposes, you are a resident alien if you meet certain criteria, such as the "green card test" and the "substantial presence test" for the fiscal year. Assuming you meet those criteria, the tax treatment is the same as if you were a US citizen or green card holder - i.e. your 2015 worldwide income is subject to US income tax.

If you are a non-resident alien for tax purposes (i.e. you do not meet the criteria as above), you pay US tax on the amount of your effectively connected income for 2015.

The IRS website explains all these cases, criteria, definitions, etc. http://www.irs.gov/Individuals/International-Taxpayers

Personal advice: aside from reading the IRS website, now is the time to talk to a professional about your situation (not after you have already moved to the US), and potentially consider the right timing of your move to the US in the 2015 fiscal year vis-a-vis the potential Swiss income that you might have in the fiscal year. I hope this helps a little bit!
Reply With Quote
Reply

Tags
2nd pillar, payout, pension, us tax




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
I am becoming paranoid [US tax options for US/FR dual citizen living in CH] FatCat Finance/banking/taxation 44 16.10.2014 11:31
US Citizen trying to immigrate her Swiss husband to the US. drix Permits/visas/government 3 03.06.2013 17:54
US citizen working in the CH- Taxes in CH and US and pension contributions in CH Andra2010 Leaving Switzerland 23 07.04.2011 02:06
Non-EU ( US ) chances of working in the CH Pharmaceutical Industry?! Isa_RC Employment 1 04.06.2010 18:38
Taking pension out of CH back to US shpadre Finance/banking/taxation 1 11.07.2007 22:23


All times are GMT +2. The time now is 06:37.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2016, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0