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Old 07.05.2009, 08:39
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US tax on Swiss pension savings?

A Swiss friend is moving from Zurich to Boston. He anticipates living and working in Boston for about 5 years. He wants to cash out his Swiss pension and retirement plans (Pillars 2 and 3), maybe buy an apartment there.

He understands the Swiss tax liability. What taxes must he pay in the US when
(a) redemption done before moving?
(b) redemption after moving to US?

Anyone know a tax expert in Zurich or Boston, who understands the US tax rules (and US tax practices!) in the context of the US/Swiss taxation agreement?
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Old 07.05.2009, 21:32
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Re: US tax on Swiss pension savings?

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A Swiss friend is moving from Zurich to Boston. He anticipates living and working in Boston for about 5 years. He wants to cash out his Swiss pension and retirement plans (Pillars 2 and 3), maybe buy an apartment there.

He understands the Swiss tax liability. What taxes must he pay in the US when
(a) redemption done before moving?
(b) redemption after moving to US?

Anyone know a tax expert in Zurich or Boston, who understands the US tax rules (and US tax practices!) in the context of the US/Swiss taxation agreement?
Hi Goldtop,

Sorry I can't recommend an expert, but here are a few notes I took from a presentation a few years back:

On the Swiss side:
- You can't cash in the accounts until after you leave the country
- You need to be in a country outside the EU
- You need to leave CH permanently (if your friend has a Swiss pass and was born here, then that may be a difficult one to meet)
- Should you return to CH, within a period of I think 10 years, there are obligations by pay it back in again!!!

On the other side most countries treat the amount being transferred as capital and so no income taxes arise, although some wealth or capital taxes might be charges.

Like I said these are notes for an old presentation and by now they may well be out of date, so try to find an expert.

Jim.
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Old 07.05.2009, 21:42
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Re: US tax on Swiss pension savings?

In theory, the company contributions were taxable income in the US at the time they were paid by the Swiss company. Thus, if he was reporting as income, there should be no US tax. I assume this was a US citizen.

In theory, the interest income should be taxable at the time the individual receives them the pay-out and thus would be reported at that point in time less any Swiss tax paid.

This is in theory how it should work, now, not sure in practice how it works.

If he is Swiss citizen, he should not owe any US tax on this.
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Old 08.05.2009, 01:17
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Re: US tax on Swiss pension savings?

US tax law gives no special treatment to the Swiss retirement savings, they would be viewed like any other personal investment account. So removing the assets from the scheme has no US effect. What does have effect is obtaining income or gains with respect to the assets (whether or not still within the retirement scheme/account), while qualifying as a US tax resident.

Les Edelman
US tax lawyer based in Belgrade, Serbia

Last edited by Nathu; 09.05.2009 at 13:12. Reason: Please limit commercial links to the user profile.
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Old 08.05.2009, 18:45
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Re: US tax on Swiss pension savings?

I recently moved from Switzerland to the US and have withdrawn my pension.

I was told by my swiss bank that I needed to complete the form "Auftrag auf Rueckstattung der Quenllensteuer auf Kapitallesitungen" and submit to the cantonal tax office. The form includes a section to be completed by the US tax office where they declare to be informed of the funds.

Does anyone know when I need to do this, is it something I do now or when I submit my 2009 US tax return?
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Old 10.05.2009, 11:16
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Re: US tax on Swiss pension savings?

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I recently moved from Switzerland to the US and have withdrawn my pension.

I was told by my swiss bank that I needed to complete the form "Auftrag auf Rueckstattung der Quenllensteuer auf Kapitallesitungen" and submit to the cantonal tax office. The form includes a section to be completed by the US tax office where they declare to be informed of the funds.

Does anyone know when I need to do this, is it something I do now or when I submit my 2009 US tax return?
Did you redeem the Swiss pension after you became taxable resident in the US?
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Old 19.05.2009, 16:15
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Re: US tax on Swiss pension savings?

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Did you redeem the Swiss pension after you became taxable resident in the US?
Yes, I had to prove to my Swiss bank that I had left before I was allowed to transfer the funds.
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Old 19.05.2009, 22:14
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Re: US tax on Swiss pension savings?

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Yes, I had to prove to my Swiss bank that I had left before I was allowed to transfer the funds.
Then the US IRS would tax you on the pension withdrawal! Did you verify your US tax liability?
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Old 22.05.2009, 15:12
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Re: US tax on Swiss pension savings?

No the U.S. would not tax you on withdrawals from a Swiss pension fund. The U.S. considers Swiss pensions as normal financial accounts. U.S. taxpayers receive no tax deduction for contributions to Swiss pensions therefore there is no taxable income when the original capital/contribution is withdrawn. Only the earnings on the pension fund are taxable as are earnings on any other type of financial account.

Rebecca Heid
U.S. tax preparer located in Switzerland

Last edited by Nathu; 22.05.2009 at 22:14. Reason: Link removed, please read http://www.englishforum.ch/announcements/12-promotion-advertising-forum-guidelines-info.html
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Old 31.05.2009, 02:25
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Re: US tax on Swiss pension savings?

More detailed information:

If you want to withdraw in cash your vested benefit after having left Switzerland permanently, the best is to pass through a vested benefit foundation in the canton of Schwyz, as there you pay the lowest tax at source rate (max. 4.8%).

I have done good experience for my clients with the vested benefit foundation PensFree.
There are different solutions for the 2nd pillar as for the 3rd pillar.

Send an e-mail to
pasquale.zarra@pens-expert.ch. (or 041 226 12 30)

He speaks english and can certainly help you to find the best solution.
To make it more efficient, describe him your situation: amount of the vested benefit, your plans for the future, married, needs, when you have left Switzerland etc.
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Old 18.07.2009, 16:19
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Re: US tax on Swiss pension savings?

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No the U.S. would not tax you on withdrawals from a Swiss pension fund. The U.S. considers Swiss pensions as normal financial accounts. U.S. taxpayers receive no tax deduction for contributions to Swiss pensions therefore there is no taxable income when the original capital/contribution is withdrawn. Only the earnings on the pension fund are taxable as are earnings on any other type of financial account.

Rebecca Heid
U.S. tax preparer located in Switzerland
Hi ... so does that mean that for a US person living in Switzerland employed by a Swiss company with 2nd pillar, that when filing a US tax return the 2nd pillar account and interest earned on it should be reported? I am not sure the 2nd pillar statements actually provide interest amounts. Anyone familiar with the how Swiss 2nd pillar accounts should be handled vis-a-vis US tax returns ? (I have seen other posts indicating that a 2nd pillar should be reported on the FBAR, but it's not evident whether the 2nd pillar should be reported on the tax return itself)
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Old 18.07.2009, 16:30
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Re: US tax on Swiss pension savings?

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Hi ... so does that mean that for a US person living in Switzerland employed by a Swiss company with 2nd pillar, that when filing a US tax return the 2nd pillar account and interest earned on it should be reported? I am not sure the 2nd pillar statements actually provide interest amounts. Anyone familiar with the how Swiss 2nd pillar accounts should be handled vis-a-vis US tax returns ? (I have seen other posts indicating that a 2nd pillar should be reported on the FBAR, but it's not evident whether the 2nd pillar should be reported on the tax return itself)
The pension plan does calculate the interest on the vested assets. If the interest is not shown on the statement, you can ask the plan's administrators for interest details.
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Old 09.08.2009, 20:48
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Re: US tax on Swiss pension savings?

I have an accountant I use in NY for my US taxes. If your question is not answered please let me know and I can pass on his contact information to you.

He is Swiss and is quite knowledgable of the tax laws in CH and US.
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Old 23.08.2010, 09:02
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Re: US tax on Swiss pension savings?

Great info and explanation on this website (Democrat's Abroad).

https://www.usluo.org/tax-info-sept-2009/Tax_Info2.pdf
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Old 27.08.2010, 16:42
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Re: US tax on Swiss pension savings?

I am no tax accountant or specialist but have researched this quite a bit over the last week...on if one should report Pillar 2 pension contributions on your US taxes as "earned income".

Summary, you ask 5 tax accountants or advisers you get 5 different answers on if yes or how.

Basically, the tax treaty with Switzerland is pretty vague on the topic. I have met US colleagues that have not included the pension as income & have filed w/o issues. However, it appears if one leaves Switzerland and requests for their pension funds to be released then a tax official from your home country must sign / stamp that they have been informed...so I'm not sure what would happen then if you had not reported it as income. Therefore, my conclusion is if you can fit it in under earned income with no additional tax burden (via foreign tax exemptions / deductions) then you should.

Here's part of the text the IRS sent me when I enquired:

"Contributions, made by both employer and employee should be reported as income since foreign plans are not qualified plans (line 7 of the 2009 Form 1040, U.S. Individual Income Tax Return). The employer’s contributions cannot be excluded under the foreign earned income exclusion (not considered earned). They will not be taxed on the employee contributions when they receive the distribution because their contributions (cost) will be deducted when calculating the taxable amount. “Just as with domestic pensions or annuities, the taxable amount generally is the Gross Distribution minus the Cost (investment in the contract).”

Individuals with foreign pension plans may have to file 3520 (Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts) Please refer to form instructions for more details."
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Old 04.04.2011, 14:01
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Re: US tax on Swiss pension savings?

**reviving old thread. Not sure if mods want to separate or not.

In reference to the last posts of "Tommy Ballgame", this issue has just come to my attention as well.

Albeit it being a year or so later, wondering if anyone is reporting as income the employer part of the pension contributions (2nd pillar)?
If not, what rationale/exemptions are you using to get around it?

And the related question, given the increasing reach of FBAR, per IRS guidance/instructions, does one generally include these 2nd pillar accounts in the FBAR?
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Old 20.04.2011, 23:09
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Re: US tax on Swiss pension savings?

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Albeit it being a year or so later, wondering if anyone is reporting as income the employer part of the pension contributions (2nd pillar)?
If not, what rationale/exemptions are you using to get around it?
As I understand, your employer's contributions to your 2nd pillar are taxed just like your regular wages or salary. I followed guidance from Taxact and filled out "Form FEC" (foreign employer compensation).

Now when I retire an withdraw from my 2nd pillar, will it be taxed again? This is still grey to me, but I am decades away from that, so who knows what the hell the law will be then.
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Old 23.12.2012, 21:44
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Re: US tax on Swiss pension savings?

maybe reviving old thread?

As a non US citizen, non Swiss citizen but rather EU passport holder, do I have to declare to the US the fact that I will receive my pension fund 2 from my employer within the first 4 days of January 2013, even though I am not moving to the US actually physically until the 5th of january?
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