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Old 29.07.2014, 16:13
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Do US-CH treaty tie breaker rules exempt green card holders from us tax?

Hi all

I am us green card holder living in Switzerland and heared that green card holder can claim the tax treaty Art 4.3 on form 8833 with the result that their tax is being calculated as if this taxpayer was a non-resident of the United States.

Is there anybody having experience with this?

Regards,
Fred

http://swflcpa.com/2014/03/treaty-tie-breaker-relief/
http://hodgen.com/how-to-make-a-trea...s-nonresident/
http://www.irs.gov/pub/irs-trty/germany.pdf
http://www.irs.gov/pub/irs-trty/swiss.pdf
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Old 29.07.2014, 16:23
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

you need to file otherwise they'll take the green card from you on next entry. I'd even say you need to comply with FATCA and all that too.
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Old 29.07.2014, 16:45
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

I have done the filing. But I got the answer they do not allow my tax treaty exemption.

But they did not add any further information why they don't.

Because I made a formal error claiming Art 4.1,4.3 on form 8833 on section 301.7701 or because the US-CH tax treaty doesn't specify tax treaty exemptions for green card holders as other US tax treaties do.

Regards, Fred
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Old 29.07.2014, 17:37
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

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you need to file otherwise they'll take the green card from you on next entry. I'd even say you need to comply with FATCA and all that too.
They'll probably take it away anyway. This is at the end of form 8833.

Termination of U.S. Residency

If you are a dual-resident taxpayer and a long-term resident (LTR) and you are filing this form to be treated as a resident of a foreign country for purposes of claiming benefits under an applicable U.S. income tax treaty, you will be deemed to have terminated your U.S. residency status for federal income tax purposes. Because you are terminating your U.S. residency status, you may be subject to tax under section877A and you must file Form 8854, Initial and Annual Expatriation Statement. You are an LTR if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your status as an LTR ends. For additional information, see the Instructions for Form 8854, and Publication 519, U.S. Tax Guidefor Aliens.

http://www.irs.gov/pub/irs-pdf/f8833.pdf

Digging further it doesn't look like you needed to file 8833 in the first place.

U.S. Residency Under Tax Treaty “Tie-Breaker” Rule
In certain circumstances, individuals who are treated as residents of the United States under an income tax treaty (after application of the so-called “tie-breaker” rule) will be entitled to treaty benefits. (The “tie-breaker” rule is explained in chapter 1 under Effect of Tax Treaties.) If this applies to you, you generally will not need to file a Form 8833 for the income for which treaty benefits are claimed. This is because the income will typically be of a category for which disclosure on a Form 8833 is waived. See Reporting Treaty Benefits Claimed .

http://www.irs.gov/publications/p519...link1000222729





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Old 29.07.2014, 21:48
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

Thanks for your answer.

To answer your first point. I recently returned my green card as it has been invalid for a lot of years already.

What I wonder is why the IRS says my income tax treaty exemption is not valid. As I understand the treaty there is a tie breaker rule without a real saving clause.
http://www.irs.gov/pub/irs-trty/swiss.pdf

Art 1.2 The United States may tax a person who is treated as a resident under it's taxation laws as if the Convention had not come into effect (except where such person is determined to be a resident of Switzerland under the provisions of paragraph 4.3 or 4.4.)
Art 4.1 ...if however , such a person is a resident of Switzerland under this paragraph, such person also will be treated as a United States resident under this paragraph and such person's status shall be determined under paragraph 3
Art 4.3 Where by the provisions of paragraph 1 an individual is a resident of both Contracting States, his status shall be determined as follows:
a) he shall be deemed to be a resident of the state in which he has a permanent home available.
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Old 29.07.2014, 22:36
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

If you're no longer a green card holder, then any exemption that would apply to a green card holder (not even sure there is one) would not apply to you, right? So I am not sure I understand the question.
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Old 29.07.2014, 22:49
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

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Hi all

I am us green card holder living in Switzerland and heared that green card holder can claim the tax treaty Art 4.3 on form 8833 with the result that their tax is being calculated as if this taxpayer was a non-resident of the United States.

Is there anybody having experience with this?

Regards,
Fred

http://swflcpa.com/2014/03/treaty-tie-breaker-relief/
http://hodgen.com/how-to-make-a-trea...s-nonresident/
http://www.irs.gov/pub/irs-trty/germany.pdf
http://www.irs.gov/pub/irs-trty/swiss.pdf


A CPA could answer your question.


http://americanincometax.com/
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Old 29.07.2014, 23:27
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

To anser your question:

When I returned the green card a few weeks ago I filed the B-BARs and 1040NR forms with the tax treaty exemptions claimed for the last 5 to 6 years at the same time.

Now I got informed that the tax treaty exemptions have not been accepted and I would have to pay income tax plus some addtions on my whole Swiss income just because I was 15 years ago in the US for half a year with a green card and did not return it on time.

Last edited by 3Wishes; 30.07.2014 at 00:02. Reason: removed personal name from post
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Old 29.07.2014, 23:37
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

Art 1.2 in US-CH treaty seems to work as a saving claus but effects only us citizens and not green card holders. Or am I wrong?

"Notwithstanding any provision of this Convention except paragraph 3 of this Article, the
United States may tax a person who is treated as a resident under its taxation laws (except where such person is determined to be a resident of Switzerland under the provisions of paragraphs 3 or 4 of Article 4 (Resident)) and its citizens (including its former citizens) as if this Convention had not come into effect."
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Old 30.07.2014, 00:01
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

...what the IRS seems to interpet quite differentely

Tax Treaty Eligibility – Resident Alien Status

Last edited by 3Wishes; 30.07.2014 at 00:05. Reason: removed document for security reasons. Please post the text instead.
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Old 30.07.2014, 00:08
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

It sounds like the saving clause is not intended to save you, but the U.S. government. From this site (found with Google, no affiliation), emphasis mine:

Quote:
Generally, all of the tax treaties to which the U.S. is a party contain a "saving clause," which is meant to prevent residents of the treaty partner who are also citizens or residents of the U.S. from using the treaty to reduce their U.S. tax liability. Therefore, as a general rule, those individuals who qualify as a U.S. resident, under either the green card test or the substantial presence test, are not eligible for treaty benefits.
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Old 30.07.2014, 00:11
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

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To anser your question:

When I returned the green card a few weeks ago I filed the B-BARs and 1040NR forms with the tax treaty exemptions claimed for the last 5 to 6 years at the same time.

Now I got informed that the tax treaty exemptions have not been accepted and I would have to pay income tax plus some addtions on my whole Swiss income just because I was 15 years ago in the US for half a year with a green card and did not return it on time.
I'm possibly being a little dim, in which case please excuse me for asking a silly question; but if you have a lapsed green card (after living in the US for just six months 15 years ago), and you're presumably not an American citizen, why are you wanting/needing to file a US tax claim?
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Old 30.07.2014, 00:22
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

The last link just applies to Research work like at Research Foundation of SUNY.

Anyway I found a good defintion of saving clause on their webpage:

Saving Clause:
Most income tax treaties have a “saving clause” that restricts U.S. citizens, permanent residents, or resident aliens from claiming treaty benefits. Some treaties, however, have an exception to the "saving clause," which allows a resident alien and sometimes even permanent residents to continue eligibility for tax treaty benefits after passing the Green Card or Substantial Presence test.
Residency definitions are generally found in the first few articles of the treaty.

When you read Art. 1.2 of US-CH treaty ther is an exception to the "saving clause for residents but not citizens or am I wrong?

1.2 "Notwithstanding any provision of this Convention except paragraph 3 of this Article, the United States may tax a person who is treated as a resident under its taxation laws (except where such person is determined to be a resident of Switzerland under the provisions of paragraphs 3 or 4 of Article 4 (Resident)) and its citizens (including its former citizens) as if this Convention had not come into effect."
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Old 30.07.2014, 01:08
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

The technical explanation of Art.2.1 can be found at www.irs.gov/pub/irs-trty/swistech.pdf‎


"For purposes of the saving clause, "residence" is determined under Article 4 (Resident). Thus, if an individual who is not a U.S. citizen is a resident of the United States under the Code, and is also a resident of Switzerland under Swiss law, and that individual has a permanent home available to him in Switzerland and not in the United States, he would be treated as a resident of Switzerland under Article 4 and for purposes of the saving clause. The United States would not be permitted to apply its statutory rules to that person if they are inconsistent with the Convention. Thus, an individual who is a U.S. resident under the Code but who is deemed to be a resident of Switzerland under the tie-breaker rules of Article 4 would be subject to U.S. tax only
to the extent permitted by the Convention. However, the person would be treated as a U.S. resident for U.S. tax purposes other than determining the individual's U.S. tax liability."

The last sentence is a little hard to understand. Could s.o explain?

Art. 4.1
"For example, a U.S. citizen who pursuant to the "citizen/green card holder" rule is not considered to be a resident of the United States still is taxable on his worldwide income under the generally applicable rules of the Code."

Does the technical explanation of Art. 4.1 now definitively break the tie breaker rule for green card holders? And does the treaty itself or the technical explanation have law status ?
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Old 30.07.2014, 01:33
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What are the legal means of the IRS to recover US tax claims in Switzerland?

Hi

What are the legal means of the IRS to recover US tax claims in Switzerland?

Regards, Fred
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Old 30.07.2014, 08:50
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Re: What are the legal means of the IRS to recover US tax claims in Switzerland?

If you mean unpaid tax, then not a lot directly. If they know you've got outstanding amounts still owed they can, via the tax treaty with Switzerland, request more info on you, but whether they'd be able to actually get any money I don't know, more likely would be a request to extradite you back to the US for tax evasion.

But the other thing you have to worry about is that if such a request is made then it's very likely your Swiss bank is going to close your account/s immediately or at least block them because you're being wilfully non-compliant as far as the FATCA IGA is concerned.
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Old 30.07.2014, 09:06
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

As a teenager did I enrol in the green card lottery twice. Looking back am I happy I did not win...
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Old 30.07.2014, 09:11
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

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I'm possibly being a little dim, in which case please excuse me for asking a silly question; but if you have a lapsed green card (after living in the US for just six months 15 years ago), and you're presumably not an American citizen, why are you wanting/needing to file a US tax claim?
green cards don't lapse as far as I understand it and remain valid if you're in good standing with the IRS et al.

so the OP.....and his green card......have issues. I assume you have declared to your bank that you still have a green card? They WILL be interested.

I know someone who had a green card but had not filed taxes for 2-3 years since leaving the US and taking up residence in Switzerland. The green card was taken at LAX - it was that or submit those missing tax returns to the IRS right there, right then.

So not getting rid of the green card has put you in a world of hurt in my opinion. Have you tried speaking to someone qualified to help you? Like an accountant skilled in this area or the US authorities?
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Old 30.07.2014, 09:25
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

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I'm possibly being a little dim, in which case please excuse me for asking a silly question; but if you have a lapsed green card (after living in the US for just six months 15 years ago), and you're presumably not an American citizen, why are you wanting/needing to file a US tax claim?
Because despite his short time there many years ago because he didn't give up his Green Card in the proper manner he's still liable to file US tax returns. The US tax system is based on ciizenship and not residency as in the rest of the world so Americans have to file US tax returns no matter where they live. A Green Card holder is a permanent resident of the US and so falls under the same rules, unless they formally give up their card. He has now done that, but to clear up any outstanding tax obligations has to file 5 years of back taxes if he hasn't been filing as he should. If he doesn't file the final 8854 form proving he's done the necessary filing he risks a $10,000 penalty and would also become a "covered expatriate" which could incur more tax due, problems with any gifts/bequests he may want to make to any US based relatives/friends and the possibility of being barred from ever entering the US again. Not to mention the problems such a status would cause with his Swiss bank who would consider him "wilfully non-compliant" according to the IGA on FATCA recently signed by the US and Switzerland which would result in his account being blocked I suspect, if not closed completely.

Believe me, you don't want to be an American citizen or Green Card holder at the moment if you can possibly avoid it. Google FATCA and search in this section of the forum for the word and you'll find plenty of threads about the problems this US law is causing. And it's not confined to Switzerland, FATCA applies worldwide so if you're not up to date with your US tax filings you'll be in trouble wherever you live outside the US.
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Old 30.07.2014, 09:27
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Re: Do US-CH treaty tie breaker rules exempt green card holders from us tax?

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...When I returned the green card a few weeks ago I filed the B-BARs and 1040NR forms with the tax treaty exemptions claimed for the last 5 to 6 years at the same time...
From the second link Medea posted:
Quote:
Many treaties limit the number of years you can claim a treaty exemption. For students, apprentices, and trainees, the limit is usually 4–5 years; for teachers, professors, and researchers, the limit is usually 2–3 years. Once you reach this limit, you can no longer claim the treaty exemption. See the treaty or Publication 901 for the time limits that apply.
This is one possible reason your treaty exemptions were denied. Have you written to the IRS for explanation? They usually have answers, even if they don't include it in the initial communication. Otherwise I'd say this is a complex question with big financial implications...therefore the best thing you can do is to hire a competent tax adviser and not rely on our random internet suggestions, which may or may not be right and certainly are not binding on the IRS. Good luck!
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