Go Back   English Forum Switzerland > Help & tips > Finance/banking/taxation  
Reply
 
Thread Tools Display Modes
  #1  
Old 09.01.2017, 19:05
Junior Member
 
Join Date: Nov 2010
Location: Switzerland, zurich
Posts: 47
Groaned at 0 Times in 0 Posts
Thanked 2 Times in 2 Posts
countchochula has no particular reputation at present
Swiss pensions on USA tax returns

i didn't realize i'd have to be a cpa to sort out the viability of working in switzerland while still meeting my uncle same tax requirements back home. i've been researching a lot so excuse me if i wasn't able to find the exact answer here and it's been answered before.

i understand the basics of FEIE and tax credit, the 330 day basis rule and a whole bunch of other things already.

i'm trying to create a basic spreadsheet that will allow me to evaluate the viability of a given swiss salary AS AN EMPLOYEE HERE for x, y, z job opportunity. i think i have enough information (or can just use an online swiss tax calculator) to do calculate the swiss tax liability.

what i'm not sure of primarily is which swiss pensions and perhaps other swiss benefits need to be added BACK to my swiss income to give me the gross taxable income i will use for my USA TAX calculations.

1) if anybody can clearly and quickly spell out pension / benefit adjustments for the USA gross taxable income i'd be truly grateful (an example would be wonderful with fake but simple figures or a relevant link if it's easier)?

2) if anybody already has an integrated CH - USA tax calculator or spreadsheet please post! (note i never itemize back home so only the most simplest of cases is needed for me i.e. no mortgage, property or stocks!!)

3) though it will be clearer to me if somebody replies to #1 above, to clarify: as a swiss employee :

3a) my swiss pensions are pre tax and only taxed when i withdraw them much later?

3b) those swiss pensions however are *simultaneous* and essentially taxed as income back in the USA during the year i receive them as they are lumped back into my gross taxable income?

3c) which means when it comes time to withdraw them it's essentially the equivalent of double (perhaps triple) taxation in that i know i'd have to pay taxes in CH on distribution but what about the USA?

3d) which means if i intend to work in switzerland, perhaps it's better to just view the pensions as *salary* income, taking into account USA taxes on them to evaluate the overall compensation viability?

4) when it comes time to leave switzerland after x number of years, is it possible to roll the swiss pension over to the USA to shelter it from withdrawal penalties or do i need to maintain global pension accounts and withdraw from them individually when i get older?

5) i'm not sure if the annual USA pension taxes change if i'm self-employed vs employed (which is what i initially asked about)?

thanks in advance to any help out there?

PS i have dual USA / italian citizenship and am currently in CH right now so work permits not an issue. i'm currently evaluating my prospects while here on the ground.



for most recent year 2016 i'd be grateful
Reply With Quote
  #2  
Old 09.01.2017, 19:39
Forum Legend
 
Join Date: Sep 2006
Location: SZ
Posts: 10,483
Groaned at 29 Times in 25 Posts
Thanked 24,166 Times in 7,597 Posts
meloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond reputemeloncollie has a reputation beyond repute
Re: Swiss pensions on USA tax returns

In a nutshell, the IRS does not recognize Swiss pensions as qualifying plans. That means that contributions to a Swiss pension, both yours and the employer contribution, are taxed by the US as income in the year credited.

So... we pay US tax in the current year, then will pay Swiss tax when OH takes the pension on retiring. In the end there isn't much real tax benefit for us. (YMMV.)

Also be aware that you might not be able to particpate in some of your company's pension funds. We were kicked out of OH's 3A, because it invests in securities that are not allowed for Americans.


All in all, Switzerland might not be the tax paradise that many burdened with the blue book expect it to be. But the devil is in the (individual) details - so I will repeat the advice I always give when these questions crop up:

Speak to a tax pro, one qualified in both US and Swiss taxes, and run some scenarios based on your individual situation. While general knowledge is important you really do need advice and strategies that account for your specific finances, goals, and plans. It will be money well spent as you decide whether this move is right for you.
Reply With Quote
The following 2 users would like to thank meloncollie for this useful post:
  #3  
Old 09.01.2017, 20:08
Medea Fleecestealer's Avatar
Forum Legend
 
Join Date: Jul 2011
Location: Switzerland
Posts: 21,481
Groaned at 372 Times in 287 Posts
Thanked 16,294 Times in 9,247 Posts
Medea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond repute
Re: Swiss pensions on USA tax returns

A few other things to think on. You could have problems getting a bank account here, particularly if self-employed. Banks are unwilling to open business accounts for Americans who have signatory rights to those accounts. Why? Because said account/s would have to be reported on an FBAR form if they come to an aggregate figure of more than $10,000 at any time of the year - the same for any personal account/s you have too btw. Also you will need to sign a W-9 form to open any account here, business or personal, so the bank can send the account info on to the IRS.

You'll find more on the social security, etc, here:

https://www.irs.gov/individuals/inte...-aliens-abroad
Reply With Quote
  #4  
Old 10.01.2017, 01:17
Junior Member
 
Join Date: Nov 2010
Location: Switzerland, zurich
Posts: 47
Groaned at 0 Times in 0 Posts
Thanked 2 Times in 2 Posts
countchochula has no particular reputation at present
Re: Swiss pensions on USA tax returns

Quote:
View Post
In a nutshell, the IRS does not recognize Swiss pensions as qualifying plans. That means that contributions to a Swiss pension, both yours and the employer contribution, are taxed by the US as income in the year credited.

So... we pay US tax in the current year, then will pay Swiss tax when OH takes the pension on retiring. In the end there isn't much real tax benefit for us. (YMMV.)

Also be aware that you might not be able to particpate in some of your company's pension funds. We were kicked out of OH's 3A, because it invests in securities that are not allowed for Americans.


All in all, Switzerland might not be the tax paradise that many burdened with the blue book expect it to be. But the devil is in the (individual) details - so I will repeat the advice I always give when these questions crop up:

Speak to a tax pro, one qualified in both US and Swiss taxes, and run some scenarios based on your individual situation. While general knowledge is important you really do need advice and strategies that account for your specific finances, goals, and plans. It will be money well spent as you decide whether this move is right for you.
thanks mellancollie! that helps a lot.

quick followups

a) i've been seeing a lot of acronyms like AHV etc.. just so i'm clear on all of this, is there more than one type of potential swiss employer pension contribution? if so, how many and what acronyms do they fall under so i can make sense of offers and associated pension jargon and amounts going forward with some precision?

b) i assume by law in CH that i need to match the employer contribution or at least put in some specified minimum limit. are their minimum percentage limits for the employer and my matching pension contributions in CH and if so what are they? i'm interested in only doing the bare minimum.

ie

120K salary
10%?? employer pension contribution
10%?? employer pension (matching) contribution


c) i assume if i keep things simple that i will only need to make a single pension contribution in order to match my employer's contribution by swiss law. per #a above, does my matching pension contribution fall under an acronym and if so what is it?

fwiw, my tax situation back in the states is very simple. i don't own any property, investments or have a mortgage. i understand talking to a tax specialist is the most exact way to go on all of this but i'm just in the viability research stage right now. i simply want to be able to :

- plug in a salary estimate for my residence in a given canton
- estimate the additional compensation via CH mandated pension contribution above my base salary
- calculate annual swiss taxes (federal, canton and residence) so i can ballpark my swiss annual take home
- make sure i understand what the gross amount is to use to calculate USA taxes (apparently swiss gross +my pension contribution + employer contributions)
- use that figure to apply FEIE and or FTC to calculate my USA tax burden
- deduct USA tax burden from my swiss take home amount in order to figure out my actual (combined swiss / usa) take home pay is

super thanks for the help!
Reply With Quote
  #5  
Old 10.01.2017, 01:23
Junior Member
 
Join Date: Nov 2010
Location: Switzerland, zurich
Posts: 47
Groaned at 0 Times in 0 Posts
Thanked 2 Times in 2 Posts
countchochula has no particular reputation at present
Re: Swiss pensions on USA tax returns

Quote:
View Post
A few other things to think on. You could have problems getting a bank account here, particularly if self-employed. Banks are unwilling to open business accounts for Americans who have signatory rights to those accounts. Why? Because said account/s would have to be reported on an FBAR form if they come to an aggregate figure of more than $10,000 at any time of the year - the same for any personal account/s you have too btw. Also you will need to sign a W-9 form to open any account here, business or personal, so the bank can send the account info on to the IRS.

You'll find more on the social security, etc, here:

https://www.irs.gov/individuals/inte...-aliens-abroad
thanks fleece! i'm well-aware of the bank account issue here. somebody i was talking to mentioned that they thought it was more of a problem when the new rules came out back in 2013 but that now three years later things have started to ease up a bit and tensions have eased between CH and the IRS a bit. perhaps that's not true though???

also, i'm focusing on finding a position as an employee vs being self-employed to eliminate extra hassle for myself. my guess is that if an employer is willing to hire me as a foreigner (american), they wouldn't do so unless it was possible to actually deposit my salary check into a local bank account. but again, maybe i'm need to be exercising a bit more caution here???
Reply With Quote
  #6  
Old 10.01.2017, 08:22
Medea Fleecestealer's Avatar
Forum Legend
 
Join Date: Jul 2011
Location: Switzerland
Posts: 21,481
Groaned at 372 Times in 287 Posts
Thanked 16,294 Times in 9,247 Posts
Medea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond reputeMedea Fleecestealer has a reputation beyond repute
Re: Swiss pensions on USA tax returns

Well, you're pretty much limited to UBS, Credit Suisse and PostFinance when it comes to banking choices and it's been that way for several years now.

Frankly, employment-wise the best thing you can do for yourself is get an Italian passport. That way you can apply for jobs as an EU national which will eliminate the non-EU hiring hassle. It will still be difficult as the Swiss government is encouraging employers to hire people who already have a permit to live and work here which is why you'll see "B/C permit holder required" on a lot of job adverts. But if you're specialised enough in your skills/experience then the added benefit of EU status may help you get the job.

Don't think of lying to any bank about your US status though. You'll need to fill in a form asking if you have any US connections when opening an account. If you lie and they find out later you could be seen as being wilfully trying to avoid disclosing the info and the account could be frozen while they report you to the IRS.

It's not the employer's problem if your salary can't be deposited in an account, they're not going to check that you have one before they hire you.

Some info on self-employment here

https://www.ch.ch/en/self-employment/

and AHV and other social insurances here

https://www.ahv-iv.ch/en/Social-insurances
Reply With Quote
  #7  
Old 10.01.2017, 13:27
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 19,048
Groaned at 391 Times in 297 Posts
Thanked 18,882 Times in 10,169 Posts
fatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond reputefatmanfilms has a reputation beyond repute
Re: Swiss pensions on USA tax returns

Quote:
View Post
thanks mellancollie! that helps a lot.

quick followups

a) i've been seeing a lot of acronyms like AHV etc.. just so i'm clear on all of this, is there more than one type of potential swiss employer pension contribution? if so, how many and what acronyms do they fall under so i can make sense of offers and associated pension jargon and amounts going forward with some precision?

b) i assume by law in CH that i need to match the employer contribution or at least put in some specified minimum limit. are their minimum percentage limits for the employer and my matching pension contributions in CH and if so what are they? i'm interested in only doing the bare minimum.

ie

120K salary
10%?? employer pension contribution
10%?? employer pension (matching) contribution


c) i assume if i keep things simple that i will only need to make a single pension contribution in order to match my employer's contribution by swiss law. per #a above, does my matching pension contribution fall under an acronym and if so what is it?

fwiw, my tax situation back in the states is very simple. i don't own any property, investments or have a mortgage. i understand talking to a tax specialist is the most exact way to go on all of this but i'm just in the viability research stage right now. i simply want to be able to :

- plug in a salary estimate for my residence in a given canton
- estimate the additional compensation via CH mandated pension contribution above my base salary
- calculate annual swiss taxes (federal, canton and residence) so i can ballpark my swiss annual take home
- make sure i understand what the gross amount is to use to calculate USA taxes (apparently swiss gross +my pension contribution + employer contributions)
- use that figure to apply FEIE and or FTC to calculate my USA tax burden
- deduct USA tax burden from my swiss take home amount in order to figure out my actual (combined swiss / usa) take home pay is

super thanks for the help!
Full salary does not need to be pensionable by law & 10% contribution employer contribution is never required.
Reply With Quote
  #8  
Old 10.01.2017, 13:58
TheLaughingCow's Avatar
Senior Member
 
Join Date: Apr 2012
Location: Der Schweizer Mittelland
Posts: 271
Groaned at 2 Times in 2 Posts
Thanked 209 Times in 113 Posts
TheLaughingCow has earned the respect of manyTheLaughingCow has earned the respect of manyTheLaughingCow has earned the respect of many
Re: Swiss pensions on USA tax returns

Quote:
View Post
thanks mellancollie! that helps a lot.

- make sure i understand what the gross amount is to use to calculate USA taxes (apparently swiss gross +my pension contribution + employer contributions)
- use that figure to apply FEIE and or FTC to calculate my USA tax burden
- deduct USA tax burden from my swiss take home amount in order to figure out my actual (combined swiss / usa) take home pay is

super thanks for the help!
Hi ,

Regarding some of your questions.

Taxable income ( for Switzerland) includes income from employment, pensions, other income ( such as winnings ), and income from securities and bank accounts. It can also include income from property ( in Switzerland or abroad ).

I know you said you do not have any property, but I'm adding that information for other readers who might have property.

Your Gross income will be the income from employment & pensions. ( For US tax returns )


HTH

Last edited by TheLaughingCow; 10.01.2017 at 14:15. Reason: typo & clarity
Reply With Quote
Reply




Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Tax Relief on Pensions Englishleeds Finance/banking/taxation 15 12.12.2018 16:21
US TAX on Swiss Pensions Apollo55 Finance/banking/taxation 22 15.03.2014 18:57
tax accountant/advisor for Swiss and U.S. tax returns rowayton1999 Finance/banking/taxation 2 16.07.2013 11:09


All times are GMT +2. The time now is 15:39.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2020, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0