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  #41  
Old 01.09.2012, 17:33
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Re: US Tax Basics 101

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I learned today that North Korea and Eritrea also tax based on citizenship. So, the US is in very fine company indeed....
Yeah, and evidently the US have commented unfavourably on the fact that Eritrea does too. Talk about hypocrisy.
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  #42  
Old 01.09.2012, 17:49
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Re: 2nd Pillar Reporting: 8938 OR FBAR?

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From everything I've read, you don't report pillar 2 on FBAR but do on 8938 if your total foreign assets (so not just the pension) are over $200,000 (if you're not filing a joint return and are a foreign resident - $400,000 if filing a joint return).

However, I'd be curious to hear about someone who does report the pillar 2 on FBAR and why?
8938 would be the correct form now.

FBAR pre 2011.

Like many things with US tax and addition reporting obligations, the Pillar 2 reporting on FBAR is/was a grey area. Many opinions but in general it was deemed sensible to do so.

I wouldn't amend or worry in basis you have reported the income, as no penalties can be applied in this instance.
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  #43  
Old 01.09.2012, 17:50
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Re: 2nd Pillar Reporting: 8938 OR FBAR?

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8938 would be the correct form now.

FBAR pre 2011.

Like many things with US tax and addition reporting obligations, the Pillar 2 reporting on FBAR is/was a grey area. Many opinions but in general it was deemed sensible to do so.

I wouldn't amend or worry in basis you have reported the income, as no penalties can be applied in this instance.
Yes, we ended up reporting it on FBAR for 2011 (far under the 8938 amounts). Thanks!
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  #44  
Old 01.09.2012, 19:02
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Re: 2nd Pillar Reporting: 8938 OR FBAR?

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8938 would be the correct form now.

FBAR pre 2011.

Like many things with US tax and addition reporting obligations, the Pillar 2 reporting on FBAR is/was a grey area. Many opinions but in general it was deemed sensible to do so.

I wouldn't amend or worry in basis you have reported the income, as no penalties can be applied in this instance.
I called the IRS twice regarding 2nd pillar reporting requirements in FBAR and recorded both phone conversations.

1st phone call - I explained the nature of the 2nd pillar, a government-mandated company pension plan in which I have no control or influence over the inflow or outflow of cash as I still live in Switzerland, have always been gainfully employed, am not retired and have no plans to purchase property. The response I got : "If you don't control it, you don't report it in FBAR".

2nd phone call a few months later - She hung up after my question.
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  #45  
Old 01.09.2012, 19:06
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Re: US Tax Basics 101

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I think this refers to pension payments you receive upon retirement?
This is indeed the funny and contradictory aspect of the US-Swiss tax treaty.

Per Article 18, pension payouts beneficially derived from a resident of a contracting state in consideration of past employment shall only be taxed by that state.

This essentially would be a justification to exclude completely exclude AHV/AVS and 2nd Pillar cash movements from the 1040 since they are not supposed to be taxed in the first place anyway.
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  #46  
Old 01.09.2012, 21:06
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Re: 2nd Pillar Reporting: 8938 OR FBAR?

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I called the IRS twice regarding 2nd pillar reporting requirements in FBAR and recorded both phone conversations.

1st phone call - I explained the nature of the 2nd pillar, a government-mandated company pension plan in which I have no control or influence over the inflow or outflow of cash as I still live in Switzerland, have always been gainfully employed, am not retired and have no plans to purchase property. The response I got : "If you don't control it, you don't report it in FBAR".

2nd phone call a few months later - She hung up after my question.
Our accountant made the decision for us about it - I think they [accountants] are erring on the side of caution.
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  #47  
Old 07.06.2013, 10:08
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Re: US Tax Basics 101

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...the US is the only country in the world to require its citizens to file US taxes in addition to the local taxes I file and pay here at home in Switzerland.
Not that it will make any of us feel any better, but China also does the same.
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  #48  
Old 07.06.2013, 10:47
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Re: US Tax Basics 101

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Not that it will make any of us feel any better, but China also does the same.
Not according to Wikipedia, they don't, but I'm willing to accept that there are more authoritative sources out there. Got one?
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  #49  
Old 07.06.2013, 11:01
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Re: US Tax Basics 101

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Not that it will make any of us feel any better, but China also does the same.
No, only Eritrea also taxes based on citizenship not residency. Some countries do it on a limited basis though, but China isn't one of them:

http://en.wikipedia.org/wiki/Interna...on#Citizenship
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  #50  
Old 07.06.2013, 11:31
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Re: US Tax Basics 101

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Not according to Wikipedia, they don't, but I'm willing to accept that there are more authoritative sources out there. Got one?
Again, not sure it makes us feel in better but my source was from Deloitte. It came up in a discussion around Expats earlier this week. I've attached a pdf from KPMG because their article had a clearer definition of how China defines "domiciled". I'm not Chinese, but I'm sure there are loop holes and exceptions, but I was just pointing out that American's aren't the only ones having to deal with that type of global tax policy. If the US ever simplified their tax code for all of us, including corporations, then they might be able to get around the need to tax global income, but given the last 20 years I'm losing hope that that will ever happen. Until then, I'm writing off my time posting on this forum as a business expense!

http://www.kpmg.com/global/en/issues...ents/china.pdf

"Domiciled individuals are taxed on worldwide income, whereas
non-domiciled individuals are generally taxed on Chinese-sourced
income only."

"A domiciled individual is defined as an individual who, by
reason of the individualís permanent registered address,
family, and/or economic interests, habitually resides in China.
An individual with a Chinese passport, or a hukou (household
registration), is likely to be deemed as domiciled in China
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  #51  
Old 16.10.2013, 13:16
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Re: US Tax Basics 101

So it seems to be true?

American citizens are taxed world wide on their income, but Apple, Google and Amazon are not,

http://www.bbc.co.uk/news/business-22600984
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  #52  
Old 16.10.2013, 13:20
Medea Fleecestealer's Avatar
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Re: US Tax Basics 101

Of course not! They're businesses, not citizens.
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  #53  
Old 19.07.2015, 16:54
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Re: US Tax Basics 101

Hello, all.

I really appreciate the information gathered here - it has helped me greatly.

I'd like to ask for clarification of one more item: Do ALV and NBUV qualify as eligible income taxes for which I can take a credit on Form 1116?

Background:
I read on the IRS web site that social security taxes are not eligible foreign income taxes for purposes of calculating the foreign tax credit (Form 1116). From the US-Switzerland Totalization agreement, I understand social security taxes to include AHV (retirement and survivors' pension insurance) and IV (disability insurance).
On my year-end summary (Lohnausweis), these disallowed items (AHV and IV) are clustered together with ALV (unemployment insurance) and NBUV (non work-related accident/injury insurance). ALV and NBUV amounts are calculated based on my salary and are mandatory payments, so they would seem to fit the definition of an income tax that is eligible for credit on Form 1116, but I haven't found any statement here or elsewhere on the web confirming this and their clustering with disallowed items makes me question this logic.
Thank you in advance for any clarification you can provide regarding the proper treatment of ALV and NBUV for the purposes of calculating the foreign tax credit on Form 1116.
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  #54  
Old 18.09.2016, 15:11
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Re: US Tax Basics 101

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You should attach a statement, each year, showing your personal contribution, your employer contribution, and any declared growth thats been reported on the return so that you can track the basis. When the plan is distributed, say when you leave Switzerland, then you have non-taxable basis in the plan from which you have reported and already paid tax on in the US.
The statement above was made in reference to pension funds, but I'm wondering where it stops and how it works in practice. Would I need to be able to produce the cost basis for all accounts from which I convert the funds into US dollars, even if the money was earned here in Switzerland in Swiss Francs? I'm wondering in particular about 3a accounts, 3b accounts, personal bank savings accounts (Sparkonto), and ordinary personal bank accounts (Universalkonto).

From reading a bit elsewhere, I think all of these accounts count as investments in the eyes of the IRS since they are held in foreign currency. [Rationale: due to currency fluctuations, they can generate capital gains relative to their USD value at the time the foreign currency was first purchased (or, in my case, earned as income in Swiss Francs and deposited into one of these accounts).] I also read that I should use the FIFO (First In First Out) approach and that foreign exchange gains only have to be reported if they exceed $200. Do I have this right?
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