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Old 20.06.2007, 22:17
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Expatriate Tax Allowance

Hello Everyone,

I currently live in the UK and am in the process of moving to Switzerland (Vaud) to work there for several years. I own a flat in the UK and am planning to rent it out while I am living in Switzerland.

Is it true that if I rent out my UK flat that I am no longer eligible for the Expatriate Tax Allowance?

I've been searching around but so far haven't found the answer. Can anyone help?

Thanks in advance!

Charday
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Old 20.06.2007, 22:29
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Re: Expatriate Tax Allowance

Not sure what the expat tax allowance is...but
I rent out my house in the UK, sent form to inland revenue declaring my house as a source of income, and as its below the lower tax band I don't have to pay income tax on the money earned.

Also in Switzerland when filing a tax return do not mention overseas income as you will be taxed on it.

Is that what you mean?
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Old 21.06.2007, 00:32
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Re: Expatriate Tax Allowance

Hi PlantHead,

Unfortunately I don't know much more about it. All I do know is that it can add an extra 1500 CHF to your monthly pay packet. It appears that you are eligible if you are an expatriate and if you also own foreign property? It may also relate to self employed people, but I'm not sure.

I have just found the following links:

http://www.englishforum.ch/finance-b...ce-expats.html

and

http://www.steueramt.zh.ch/html/engl...atriates_e.htm


I'll post back once I have had a chance to read through them.

Charday
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Old 21.06.2007, 08:39
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Re: Expatriate Tax Allowance

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Also in Switzerland when filing a tax return do not mention overseas income as you will be taxed on it.
This could come back to bite you, especially now the relevant tax authorities talk to each other a bit more than they used to.

The correct (and legal) procedure would be to declare your overseas rental income against which you can claim your mortgage payments. If you own the property outright then you are liable to the wealth tax on the value. You can claim the costs of any maintenance etc.

The so-called expat tax allowance is for those living and working in Switzerland who must necessarily maintain a property overseas - for example, it is still lived in by the family or you are a weekly commuter. If you are unlucky, you may be asked to prove this.

If you rent it out then you are not eligible for this allowance, instead it is a source of income.
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Old 21.06.2007, 12:30
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Re: Expatriate Tax Allowance

Expatriate Tax Allowance is valid for people who are with expatriate contract and not Local contract . The tax authorities in Vaud are very particular about it. You will get 18000CHF tax deductible as part of this allowance.
You can declare the rental value of your flat as part of your world wide income. If you want piece of mind then just call to the tax authorities Lausanne. I am sure somebody will give advice to you in English.

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Hello Everyone,

I currently live in the UK and am in the process of moving to Switzerland (Vaud) to work there for several years. I own a flat in the UK and am planning to rent it out while I am living in Switzerland.

Is it true that if I rent out my UK flat that I am no longer eligible for the Expatriate Tax Allowance?

I've been searching around but so far haven't found the answer. Can anyone help?

Thanks in advance!

Charday
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Old 21.06.2007, 12:32
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Re: Expatriate Tax Allowance

yes this old loophole was shut back in the late 90s and they are strict.

Down I believe to all the scumbags abusing it. Something like 3500 per month was evading (or avoiding) tax and social security. Some people saw some big bills for this.
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Old 21.06.2007, 12:42
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Re: Expatriate Tax Allowance

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Expatriate Tax Allowance is valid for people who are with expatriate contract and not Local contract .
That is a very good point. For example, you cannot get the allowance if you are self employed in Switzerland.
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Old 22.06.2007, 00:42
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Re: Expatriate Tax Allowance

I do have an expatriate contract and it appears that I am eligible for the Expat Tax Allowance as long as I don't rent out my UK property while living in CH.

As the rental income from renting out my flat in the UK will most likely be higher than what I'd get from the Expat Tax Allowance I'm going to go ahead and rent it out.

Thanks to Greenhill for the suggestion to get in touch with the tax authorities in Lausanne. They will be a useful resource for the hundred other tax related questions I'm sure to come up with.

Many thanks,

Charday.
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Old 22.06.2007, 16:07
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Re: Expatriate Tax Allowance

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Expatriate Tax Allowance is valid for people who are with expatriate contract and not Local contract . The tax authorities in Vaud are very particular about it. You will get 18000CHF tax deductible as part of this allowance.
You can declare the rental value of your flat as part of your world wide income. If you want piece of mind then just call to the tax authorities Lausanne. I am sure somebody will give advice to you in English.
Hi,

How does one differentiate an expatriate contract from a local contract? Does it have to be an intra-company transfer? Or does the contract have to explicitly mention "expatriate"?

Would like to know if I can be considered as an expatriate as I'm about to sign an employment contract and will be leaving behind a home which my mother will live in.

Thanks!
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Old 22.06.2007, 17:34
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Re: Expatriate Tax Allowance

Swissbob - this is really useful!!! So now here are my questions:

1. I guess I will be an expat in CH. I own an apartment in NYC and I will split my time (though not evenly... bummer) between Zurich and NY, hence, this qualifies me for expat allowance?

2. "The correct (and legal) procedure would be to declare your overseas rental income against which you can claim your mortgage payments." -------->Does this mean that I get some tax benefits (or liability) against my mortgage payments in the states? Not sure I understand the quote... Sorry.

But thanks for a really useful thread!

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This could come back to bite you, especially now the relevant tax authorities talk to each other a bit more than they used to.

The correct (and legal) procedure would be to declare your overseas rental income against which you can claim your mortgage payments. If you own the property outright then you are liable to the wealth tax on the value. You can claim the costs of any maintenance etc.

The so-called expat tax allowance is for those living and working in Switzerland who must necessarily maintain a property overseas - for example, it is still lived in by the family or you are a weekly commuter. If you are unlucky, you may be asked to prove this.

If you rent it out then you are not eligible for this allowance, instead it is a source of income.
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Old 23.06.2007, 08:18
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Re: Expatriate Tax Allowance

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Swissbob - this is really useful!!! So now here are my questions:

1. I guess I will be an expat in CH. I own an apartment in NYC and I will split my time (though not evenly... bummer) between Zurich and NY, hence, this qualifies me for expat allowance?

2. "The correct (and legal) procedure would be to declare your overseas rental income against which you can claim your mortgage payments." -------->Does this mean that I get some tax benefits (or liability) against my mortgage payments in the states? Not sure I understand the quote... Sorry.

But thanks for a really useful thread!

1. Depends on your contract

2. You get tax relief on your mortgage (but not if you get the expats allowance - it's one or the other).
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Old 23.10.2007, 15:22
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Re: Expatriate Tax Allowance

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1. Depends on your contract
Swissbob, can you provide any more guidance here ? Is there particular wording that must be present in a contract to have any chance of being classified as an expat ?

I am soon to be relocating from the Sydney office of the company I work for to our Zurich office. I have enquired about expatriate status with some of the administrative staff there, but they are insisting that it is extremely difficult to get and not worth my while.

Since I am in the position of being able to write my own job description for the employment contract with the Zurich office, it would be handy to know if there is anything specific that must be in it before I do so.

Cheers,
CS
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Old 24.10.2007, 11:41
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Re: Expatriate Tax Allowance

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Swissbob, can you provide any more guidance here ? Is there particular wording that must be present in a contract to have any chance of being classified as an expat ?
I am also very interested in this - is it the company who "decides" whether you are regarded as an expat, or is there some special wording that the contract must say and then its up to the tax authorities? I have heard some people talk about "expat" contracts and "local" contracts, but I am not sure what the difference is as surely both will pay swiss francs locally....
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Old 24.10.2007, 11:59
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Re: Expatriate Tax Allowance

Start asking for relocation and/or IA allowances from your employer, and they will soon tell you whether you are a local-hire for local people or not.

dave


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I am also very interested in this - is it the company who "decides" whether you are regarded as an expat, or is there some special wording that the contract must say and then its up to the tax authorities? I have heard some people talk about "expat" contracts and "local" contracts, but I am not sure what the difference is as surely both will pay swiss francs locally....
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Old 24.10.2007, 12:28
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Re: Expatriate Tax Allowance

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Start asking for relocation and/or IA allowances from your employer, and they will soon tell you whether you are a local-hire for local people or not.
dave
This is mostly a non-starter because the move is voluntary (although the taxman doesn't need to know that if it makes a difference ). With that said, I have a pretty good relationship with my employer - they're giving me a "Swiss allowance" boost to my salary so long as I am there (to cover higher living costs) and will also reimburse for some of the moving costs (airfare, approx CHF2000 to offset my initial accommodation expenses).

The communication I got from our admin staff about my contract was:

"First of all we need to have a signed contract, established by NightHawk Zurich to be able to come to work here. I will complete it as soon as I get the template attached back. Please indicate a job description for yourself, your annual salary to be paid in 12 monthly rates and the commencement date."

Further, the response to a few questions about getting expat status was, basically, "you won't qualify and you don't earn as much as 'expats' usually do, so it's not worth it". My salary will be ca. CHF125,000 (plus annual bonus - probably another 8-10% on top), and by my primitive calculations, even just the CHF18,0000 deduction would put roughly another CHF500/mo in my pocket (which doesn't seem insignificant to me ).

This doesn't look like good news, but I'm just wondering if my employment contract's wording - if appropriate - could allow me to pursue it further once I arrive, with a tax agent there. Or is it something that has to be organised by the company on my behalf ? My understanding at this point is that I won't be "resigning" from my current position in Australia, and this is internally consider a transfer - but I will be being paid in Switzerland, in CHF.

I hold dual Australia/British (hence EU) citizenship, so I assume I'll end up with a B permit (will I get to suggest how long it is valid for ?). I also own a home here in Australia and have no plans to stay in Switzerland past about 3 years - although my wife is also coming over as well. I don't know if these factors will help sufficiently, but I'd appreciate any advice people have, especially if I need to have some magical combination of phrases in my employment contract.

Cheers,
CS
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Old 24.10.2007, 15:28
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Re: Expatriate Tax Allowance

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Start asking for relocation and/or IA allowances from your employer, and they will soon tell you whether you are a local-hire for local people or not.

dave
in my case, I will be moving to a new employer so could not fall within the international assignee (which I take it you mean by "IA") definition - however, it would not be a role that could be fulfilled by a local hire so perhaps that is in my favour - so like Dr Smithy, I too am looking for the magical phrase to ask for in the employment contract - from my reading of the situation, I think the contract needs to be clear that it is for an initial period of no longer than 5 years whereas most employment contracts do not state an end date, only a start date and notice period....
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Old 24.10.2007, 17:33
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Re: Expatriate Tax Allowance

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in my case, I will be moving to a new employer so could not fall within the international assignee (which I take it you mean by "IA") definition - however, it would not be a role that could be fulfilled by a local hire so perhaps that is in my favour - so like Dr Smithy, I too am looking for the magical phrase to ask for in the employment contract - from my reading of the situation, I think the contract needs to be clear that it is for an initial period of no longer than 5 years whereas most employment contracts do not state an end date, only a start date and notice period....
Do not rely on this - it could cost you big time if you think you will get the expat deal and then find you don't qualify.

From the information, it's clear that you will be a local hire. I don't think you will persuade the authorities otherwise.
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Old 24.10.2007, 19:28
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Re: Expatriate Tax Allowance

If a person is a CH national living in the US, letting out their former residence in CH which still has a mortgage, is it more advantageous financially to be US and not have the Swiss passport or are there benefits in having Swiss nationality. I mean a US citizen could claim on the house expenses against their US taxes and not have to pay Swiss taxes- is that right?
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Old 25.10.2007, 13:28
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Re: Expatriate Tax Allowance

A few weeks ago I spoke to a senior tax adviser for one of the big 4 accounting firms. He said that although, technically the CHF 18,000 deduction applies to expatriates and not those who have relocated to Switzerland on local contracts, it may be possible, in the case where an employee has been relocated to Switzerland by the same employer but on a permanent local contract, to argue that in effect the employee should be treated as an expatriate - at least for a period of time. The employee should be able to demonstrate that they are receiving the same level of relocation support as the employer would give an expatriate - i.e. relocation assistance, housing assistance etc. The only difference being the absence of the expat contract. So, in substance he is an expatriate. There's no guarantee the argument will work but it is worth trying because it has previously been accepted.

On the issue of when is an expat not an expat, but a local employee:

Tax authorities will usually look for certain indicators:
1. The expat assignment is a temporary one. It is timebound. There is an expectation that the expat will return to his home country or be reassigned.
2 An expat will usually have an expat contract in place. This will usually state the term of the expat assignment and will set out the conditions. The expat will usually sign this contract. This then constitutes a variation of his local employment contract.
3. The expat will remain on his local employment contract (but as varied by the expat contract)
4. The fact that the expat goes on to the local payroll is not a factor. It doesn't affect the contractual terms under which an employee transfers to another country. It is just a device to get taxes paid over to the authorities under monthly withholding. You could typically as an expat be on two payrolls: - Your home payroll (you remain on this because you do not want to come out of your UK pension and social security arangements) and your host country payroll (to pay over the host country taxes).
5. If you transfer to Switzerland on a local employment contract then typically you would cease to have a home country employment contract. The Swiss contract may include clauses about relocation assistance but it is still the one local Swiss contract.

The key thing about the expat is that he is still on the home country contract and there is an understadning that the assignment is temporary.

It may be possible to go onto a dual contract arrangment with each contract dealing with the services provided in each country and the total remueration split over two payrolls but that is way beyond my understanding.

Anyway, that was a bit of a knowledge dump but I thought it may
be useful.
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Old 14.02.2008, 16:07
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Re: Expatriate Tax Allowance

Hi,

I'm new to Switzerland and have been told something that I think I need to check out.

I have been told that if I have a 'B' permit that I can not claim the ex-pat allowance, is this correct ?

thanks,

MC
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