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Old 05.03.2012, 17:19
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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how do you suppose a savings and loan over in southern Wisconsin would react?
A Wisconsin based S&L that is investing (their own CHF or that of their customers) in Swiss securities or handling Swiss nationals needs be prepared to handle Swiss regulations.

Likewise a Swiss bank trading in US securities should be prepared to handle US regulations.

Swiss banks already face German "intimidation" - it's called buying CD-ROMs. I have yet to hear a Swiss bank kicking out German customers to ensure their data is not stolen/sold via CD-ROM.

Now if Germans were stashing away their millions in Wisconsin S&Ls maybe we'd see CD-ROM thefts/sales taking place there as well.

I wonder why we don't see that happen?

... or am I missing something?
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  #22  
Old 06.03.2012, 10:06
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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After all there is practically no interest on Swiss bank accounts & the cost of a decent safe is probably covered by having no bank charges.
Actually, I am seriously considering the safe deposit box approach to banking. It is an option.
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  #23  
Old 06.03.2012, 10:17
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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Actually, I am seriously considering the safe deposit box approach to banking. It is an option.
1] Most banks require an active account in order to have a safe deposit box, so you won't get very far if they don't let you open an account to begin with.

2] By adding cash into your box you will not have your wealth in an electronic form, which makes proving wealth for tax filing purposes harder to prove.

3] The cost of a SD box may be more than the fees charged to manage a simple bank account.
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  #24  
Old 08.03.2012, 17:19
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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So go an get angry with your government....no-one in Switzerland made these rules......
I am angry with my government. Nowhere did I suggest otherwise.
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Old 09.03.2012, 10:20
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

Out of curiosity, why are you interested in Pillar 3 as a US citizen? Any money you put into Pillar 3 will be double taxed

Example:
- You put CHF 6000 into pillar 3. CHF 6000 gets deducted for your Swiss tax as pre-tax contribution. The CHF 6000 is therefore not taxed in CH.
- However, US does NOT recognize such contribution, and hence the amount before the 6k contribution will be taxed in the US. In other words, you'll pay US tax on the CHF 6000 "now".
- When you take money out from pillar 3, the 6k will be taxed again in CH.

Therefore, it generally doesn't make sense for Americans to contribute to pillar 2 or 3. Of course, individual situations may be different.
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  #26  
Old 09.03.2012, 11:55
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

I think you may be ignoring the possibility of the earned income exclusion. That 6000 while US taxable "now" could end up being US tax free and only taxed in CH when it's taken out. It might also be possible that when the CH tax is paid there is a US tax credit generated. If I'm correct it seems there's a real benefit here. I'm no accountant so someone with real knowledge needs to chime in.

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Out of curiosity, why are you interested in Pillar 3 as a US citizen? Any money you put into Pillar 3 will be double taxed

Example:
- You put CHF 6000 into pillar 3. CHF 6000 gets deducted for your Swiss tax as pre-tax contribution. The CHF 6000 is therefore not taxed in CH.
- However, US does NOT recognize such contribution, and hence the amount before the 6k contribution will be taxed in the US. In other words, you'll pay US tax on the CHF 6000 "now".
- When you take money out from pillar 3, the 6k will be taxed again in CH.

Therefore, it generally doesn't make sense for Americans to contribute to pillar 2 or 3. Of course, individual situations may be different.
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  #27  
Old 09.03.2012, 13:01
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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I think you may be ignoring the possibility of the earned income exclusion. That 6000 while US taxable "now" could end up being US tax free and only taxed in CH when it's taken out.
Unless you are under the foreign earned income exclusion, or you otherwise have 0 US tax liabilities after deductions, etc, the 6000 that you contributed to pillar 3 will not end up tax free in the US now.

Assume foreign earned income exclusion = 90,000
Your gross income in CH = 120,000
Contribution to pillar 3 = 6,000
and for simplicity, assume 1 CHF = 1 USD

Then out of your 120k income, the first 90k is not taxed. Then you can also take foreign housing exclusion and possibly other deduction. Anyway, the 6k you contributed to pillar 3 is NOT deductible. So, unless you end up with NO US tax liability, you will by paying US tax now on the 6,000.


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It might also be possible that when the CH tax is paid there is a US tax credit generated. If I'm correct it seems there's a real benefit here. I'm no accountant so someone with real knowledge needs to chime in.
This is the part that's a bit grey. The CH tax paid on pillar 3 money will not happen until either you move to a non-EU country and take distribution from pillar 3, or when you retire. In either cases, both of those will likely happen a while after you've filed and paid US tax on that 6k. And because pillar 3 is like a saving/personal account from US's perspective (not viewed as pension), your 6k distribution will not be reported on US tax filing (it's like you withdrawing money from an account where this money is already after-tax income). But you'll have Swiss tax to pay. You might be able to claim foreign tax credit on it, but you will need to have foreign income to use the foreign tax credit. Or alternatively, it might be possible to opt for amendment for one's tax return in the year where you paid US tax on this 6k income, but then again, amendments are only accepted within 7 years.

Anyways, just saying, for those Americans who have US tax liabilities, in most cases, it doesn't make sense to try to minimize CH tax by contributing to pillar 3 or even pillar 2.
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  #28  
Old 09.03.2012, 22:44
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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I think you may be ignoring the possibility of the earned income exclusion. That 6000 while US taxable "now" could end up being US tax free and only taxed in CH when it's taken out. It might also be possible that when the CH tax is paid there is a US tax credit generated. If I'm correct it seems there's a real benefit here. I'm no accountant so someone with real knowledge needs to chime in.
Correct. On advice of my accountant I decided to get a Pillar 3A account. The logic behind it is that 3A withdrawals during retirement will be covered (i.e. made tax-free) by the FEIE.
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  #29  
Old 09.09.2021, 17:10
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

Hi all,


Following up many years later on this thread, I opened a Pillar 3 account with PostFinance in 2012 and now, 9 years latter, they are asking me to liquidate it immediately as they don't allow Pillar 3 investments for US Citizens (anymore). I discussed also with UBS, where they used to also allow it, and have similar stance.


I've been of course declaring the PostFinance Pillar 3 accounts to US tax every year and PostFinance claims to be FATCA compliant, but they seem to have changed their stance.



Does anyone know about a Swiss bank which allows US Citizens to use Pillar 3 accounts?


Thanks!
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  #30  
Old 10.09.2021, 08:10
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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Hi all,


Following up many years later on this thread, I opened a Pillar 3 account with PostFinance in 2012 and now, 9 years latter, they are asking me to liquidate it immediately as they don't allow Pillar 3 investments for US Citizens (anymore). I discussed also with UBS, where they used to also allow it, and have similar stance.


I've been of course declaring the PostFinance Pillar 3 accounts to US tax every year and PostFinance claims to be FATCA compliant, but they seem to have changed their stance.



Does anyone know about a Swiss bank which allows US Citizens to use Pillar 3 accounts?


Thanks!
I have it with ZKB and UBS, last year the UBS one was opened and it was not problem
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  #31  
Old 10.09.2021, 08:19
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

I opened a 3a account with frankly early this year (all online), and am very satisfied. I am not a US citizen, but there isn't any indication they would not accept a US citizen on their website. Maybe worthwhile asking?
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  #32  
Old 10.09.2021, 08:50
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

Still have mine at CS, Generali and a Sparkasse. However, it doesn't pay to have a 3rd pillar cause the income still gets taxed by Uncle Sam. So, what one saves in Swiss tax still gets taxed by the US and in the end will be double taxed.
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  #33  
Old 10.09.2021, 09:10
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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Still have mine at CS, Generali and a Sparkasse. However, it doesn't pay to have a 3rd pillar cause the income still gets taxed by Uncle Sam. So, what one saves in Swiss tax still gets taxed by the US and in the end will be double taxed.

YMMV. For those who take the Foreign Earned Income Exclusion (FEIE), rather than the Foreign Tax Credit, it can make sense to optimize CH taxes by investing in a Pillar 3a. Run the numbers to determine whether it makes sense for FEIE filers. However, as mentioned, any annual income will still be taxed by the U.S.
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  #34  
Old 10.09.2021, 19:53
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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YMMV. For those who take the Foreign Earned Income Exclusion (FEIE), rather than the Foreign Tax Credit, it can make sense to optimize CH taxes by investing in a Pillar 3a. Run the numbers to determine whether it makes sense for FEIE filers. However, as mentioned, any annual income will still be taxed by the U.S.
Mullhollander, can you tell me when it would be more advantageous to take the FEIE versus the Foreign Tax Credit? Also, doesn't one have to file a separate tax filing for a PFIC - which I thought Pillar 3 qualifies?

Given the ridiculously low allocation for housing expenses in Zurich versus where we last lived (Singapore), the direct offset (Foreign Tax Credit) saved us paying more to Uncle Sam and then some. PS...Housing cost in Zurich and Singapore are fairly comparable so no idea why the allocation from the IRS is so low. As an aside, it was the first time in 30+ years living in 5 different countries that we did not use FEIE.
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Old 12.09.2021, 11:59
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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Mullhollander, can you tell me when it would be more advantageous to take the FEIE versus the Foreign Tax Credit? Also, doesn't one have to file a separate tax filing for a PFIC - which I thought Pillar 3 qualifies?
A US Person who has foreign earned income of less than $108,700 or somewhat higher should likely consider the Foreign Earned Income Exclusion (FEIE). Using the FEIE can then allow the US Person to optimize his/her Swiss taxes, e.g., by making an additional contribution to Pillar II, possibly contributing to a Pillar III, making home repairs above the 10%/20% lump-sum deduction, etc.

Some Pillar III individual pension plans are considered PFICs, i.e., foreign mutual funds, and should likely be avoided by US Persons due to filing requirements. Other Pillar IIIs are essentially savings accounts and should not qualify as PFICs.
- At the risk of painting with a broad brush, I am not a fan of Pillar III investments for anyone, including US Persons. The fees are high and they seem to be sold mostly for their tax deduction and asset tax exclusion benefits, imho.

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Given the ridiculously low allocation for housing expenses in Zurich versus where we last lived (Singapore), the direct offset (Foreign Tax Credit) saved us paying more to Uncle Sam and then some. PS...Housing cost in Zurich and Singapore are fairly comparable so no idea why the allocation from the IRS is so low. As an aside, it was the first time in 30+ years living in 5 different countries that we did not use FEIE.
The IRS annual limits on housing deductions are the following for Switzerland:

Bern: $65,600
Geneva: $93,300
Zurich: $39,219
All other Swiss cities: $32,900

The IRS seems to be suggesting that Bern housing costs are 67% and Geneva housing costs 137% higher than Zurich, respectively, which is doubtful. Bern and Geneva are, of course, chock-full of US government-affiliated people while Zurich is not. Please don't call me cynical but could the IRS possibly be looking after its friends in those cities with the higher housing deductions?
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  #36  
Old 12.09.2021, 12:31
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

Just to check that I haven't missed a trick:

The housing deduction only applies to rent, not to mortgage payments - is that still correct?
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  #37  
Old 12.09.2021, 12:51
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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A US Person who has foreign earned income of less than $108,700 or somewhat higher should likely consider the Foreign Earned Income Exclusion (FEIE). Using the FEIE can then allow the US Person to optimize his/her Swiss taxes, e.g., by making an additional contribution to Pillar II, possibly contributing to a Pillar III, making home repairs above the 10%/20% lump-sum deduction, etc.

Some Pillar III individual pension plans are considered PFICs, i.e., foreign mutual funds, and should likely be avoided by US Persons due to filing requirements. Other Pillar IIIs are essentially savings accounts and should not qualify as PFICs.
- At the risk of painting with a broad brush, I am not a fan of Pillar III investments for anyone, including US Persons. The fees are high and they seem to be sold mostly for their tax deduction and asset tax exclusion benefits, imho.



The IRS annual limits on housing deductions are the following for Switzerland:

Bern: $65,600
Geneva: $93,300
Zurich: $39,219
All other Swiss cities: $32,900

The IRS seems to be suggesting that Bern housing costs are 67% and Geneva housing costs 137% higher than Zurich, respectively, which is doubtful. Bern and Geneva are, of course, chock-full of US government-affiliated people while Zurich is not. Please don't call me cynical but could the IRS possibly be looking after its friends in those cities with the higher housing deductions?
0.4% per year. Given you can deduct wealth tax and dividend tax that's not bad at all.
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  #38  
Old 13.09.2021, 10:53
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Re: U.S. citizens & 3. Säule (3rd pillar) - where to apply!?

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Hi all,


Does anyone know about a Swiss bank which allows US Citizens to use Pillar 3 accounts?


Thanks!
Mine is at VIAC.
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