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Old 30.06.2018, 02:35
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Wealth tax, Zurich/Lausanne

Hi, new member with a question about wealth taxes.


I am a retiree who wants to pursue a one year educational program in either Zurich or Lausanne (probably Zurich). I am not looking to work in Switzerland or to remain there indefinitely. I am concerned about the wealth tax. My wife will most probably remain in the US. If she does so, will I have to declare her assets and 100% of jointly held assets.



Also, does anyone know if the wealth taxes (which of course are paid to local authorities) will be considered state and local taxes by the IRS and thus aggregated with domestic US local taxes, the aggregate deduction being limited to 10k. Thanks so much.
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Old 30.06.2018, 14:40
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Re: Wealth tax, Zurich/Lausanne

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Hi, new member with a question about wealth taxes.

I am a retiree who wants to pursue a one year educational program in either Zurich or Lausanne (probably Zurich). I am not looking to work in Switzerland or to remain there indefinitely. I am concerned about the wealth tax. My wife will most probably remain in the US. If she does so, will I have to declare her assets and 100% of jointly held assets.

If the marriage is intact, you will normally need to declare her assets and income as a family unit. Generally, however, since she is living abroad, it should be possible to exclude 50% of the jointly owned assets and her assets from taxation.



The excluded assets will, however, impact the tax rate in cantons with progressive asset tax rates. To avoid paying a higher rate on your assets, you might wish to reside in Canton Schwyz, next to Zurich, where the asset tax rate is proportional (i.e., flat, not progressive).



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Also, does anyone know if the wealth taxes (which of course are paid to local authorities) will be considered state and local taxes by the IRS and thus aggregated with domestic US local taxes, the aggregate deduction being limited to 10k. Thanks so much.

Swiss asset taxes have been deductible for US Federal tax purposes and I would presume that that would continue, subject to the new limit of $10,000. I am unaware that this has changed.

Last edited by Mullhollander; 30.06.2018 at 18:11. Reason: Clarification
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Old 30.06.2018, 14:55
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Re: Wealth tax, Zurich/Lausanne

Interesting question ... if you come for one year, you will most likely have an L or B permit (?). As such, you would be paying withholding tax on any personal income rather than filing a regular tax return.
So, I speculate that it could depend on the income level during the year.
Will you have any taxable income during that period? If not, you might not have any filing obligations and therefore no requirement to pay wealth tax ...
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Old 30.06.2018, 16:45
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Re: Wealth tax, Zurich/Lausanne

If you are a student, you would normally have no income and thus not be liable for tax. I doubt very much that your wealth will be an issue - and if it is the rates are low. Please see other threads on this...
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Old 30.06.2018, 17:17
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Thanks for the response. I anticipate no earned income. But as a retiree, my wife and I have accumulated a tidy, but not municificent nest egg.

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Interesting question ... if you come for one year, you will most likely have an L or B permit (?). As such, you would be paying withholding tax on any personal income rather than filing a regular tax return.
So, I speculate that it could depend on the income level during the year.
Will you have any taxable income during that period? If not, you might not have any filing obligations and therefore no requirement to pay wealth tax ...
I would expect to be on a student visa. I would not expect any earned income.

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If the marriage is intact, you will normally need to declare her assets and income as a family unit. Generally, however, since she is living abroad, it should be possible to exclude 50% of the jointly owned assets from taxation.

The excluded assets will, however, impact the tax rate in cantons with progressive asset tax rates. To avoid paying a higher rate on your assets, you might wish to reside in Canton Schwyz, next to Zurich, where the asset tax rate is proportional (i.e., flat, not progressive).

Swiss asset taxes have been deductible for US Federal tax purposes and I would presume that that would continue, subject to the new limit of $10,000. I am unaware that this has changed.
Thank you. Strange that I could exclude 50% of jointly held assets but none of her assets.

My question about the wealth tax deduction was whether it would be added to state and local taxes and subject to the 10k limit. Already, our state and local taxes exceed 10k, so I guess I would not be able to deduct wealth taxes.

Last edited by 3Wishes; 30.06.2018 at 20:31. Reason: merging consecutive replies
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Old 30.06.2018, 17:49
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Re: Wealth tax, Zurich/Lausanne

If I may ask something concerning the payment of the taxes, since the post is alive and fresh. I know I can pay my taxes per month or at the end of the year, must I inform the office d'impot whether I will choose the monthly or annual payment? thanks
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Old 30.06.2018, 20:24
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Re: Wealth tax, Zurich/Lausanne

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If I may ask something concerning the payment of the taxes, since the post is alive and fresh. I know I can pay my taxes per month or at the end of the year, must I inform the office d'impot whether I will choose the monthly or annual payment? thanks
Only if you have a C permit or are Swiss. And no, no need to inform them
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Old 01.07.2018, 09:07
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Re: Wealth tax, Zurich/Lausanne

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If you are a student, you would normally have no income and thus not be liable for tax. I doubt very much that your wealth will be an issue - and if it is the rates are low. Please see other threads on this...
Interesting!
A retired person who could be a student.
Didn't occur to me.
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Old 01.07.2018, 09:16
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Re: Wealth tax, Zurich/Lausanne

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Interesting!
A retired person who could be a student.
Didn't occur to me.
Definitely on my list when I retire! Finally time to study what I want without thinking whether I need it (and finally have the time to do that and not having to concentrate most of my time on work)
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Old 01.07.2018, 10:53
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Re: Wealth tax, Zurich/Lausanne

I mentioned this in another thread, but it's worth mentioning here since you're a retired American - presumably receiving a pension.

FYI - Pension income is excluded from Foreign Earned Income Exclusion (FEIE). Consider the tax implications of making such a move, even for a year. Emphasis mine:

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Not foreign earned income: Foreign earned income does not include the following amounts:
  • Pay received as a military or civilian employee of the U.S. Government or any of its agencies
  • Pay for services conducted in international waters (not a foreign country)
  • Pay in specific combat zones, as designated by an Executive Order from the President, that is excludable from income
  • Payments received after the end of the tax year following the year in which the services that earned the income were performed
  • The value of meals and lodging that are excluded from income because it was furnished for the convenience of the employer
  • Pension or annuity payments, including social security benefits
Source: https://www.irs.gov/individuals/inte...come-exclusion
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Old 01.07.2018, 11:06
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Re: Wealth tax, Zurich/Lausanne

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I mentioned this in another thread, but it's worth mentioning here since you're a retired American - presumably receiving a pension.

FYI - Pension income is excluded from Foreign Earned Income Exclusion (FEIE). Consider the tax implications of making such a move, even for a year. Emphasis mine:



Source: https://www.irs.gov/individuals/inte...come-exclusion
One doesn't need to wonder why so many are leaving.

https://www.cnbc.com/2018/06/27/more...-us-heres.html
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Old 01.07.2018, 11:23
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Re: Wealth tax, Zurich/Lausanne

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Definitely on my list when I retire! Finally time to study what I want without thinking whether I need it

Did you ever pause to reflect if you actually still need to work ?


I did, and in consequence resigned ....


Jos
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Old 10.08.2018, 14:53
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Re: Wealth tax, Zurich/Lausanne

Over the past month, my thinking has solidified. If I come to Switzerland, it will be to Zurich.

Concerns about the wealth tax remain.

As fas as the income taxes are concerned, I have reviewed the tax treaty.

Since my only income would be military retirement, dividends, interest, capital gains and (if my wife remains in the US and works), my wife’s income. As I understand matters, under the treaty I would be considered a US resident for income tax purposes, and none of that income would be taxable by Switzerland. Is that correct?

Thanks.
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Old 10.08.2018, 21:50
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Re: Wealth tax, Zurich/Lausanne

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Since my only income would be military retirement, dividends, interest, capital gains and (if my wife remains in the US and works), my wife’s income. As I understand matters, under the treaty I would be considered a US resident for income tax purposes, and none of that income would be taxable by Switzerland. Is that correct?
Why would you think that? By default you'll owe money to both countries. However as US takes a bigger cut at these low incomes it's possible that the leftovers for CH would be zero indeed
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Old 10.08.2018, 22:28
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Re: Wealth tax, Zurich/Lausanne

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Did you ever pause to reflect if you actually still need to work ?


I did, and in consequence resigned ....


Jos
I did, and I decided I want to continue for a bit. Good point though!
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Old 10.08.2018, 23:18
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Re: Wealth tax, Zurich/Lausanne

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Why would you think that? By default you'll owe money to both countries. However as US takes a bigger cut at these low incomes it's possible that the leftovers for CH would be zero indeed



There is of course a tax treaty between the US and Switzerland that, as I understand it, applies to all three levels of income tax in Switzerland. Starting with the premise that I would be resident in both countries, it seems to say that, for purposes of the treaty, I would be deemed to be a US resident. And as I read the treaty, it seems that, at least in my case, all of the income would be taxed to my country of residence, the US. If that is correct, I would have no income tax liability to any Swiss entity. The wealth tax would be a different matter.
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Old 10.08.2018, 23:25
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Re: Wealth tax, Zurich/Lausanne

There's no law saying you can't be a resident of both and owe taxes to both. Furthermore as a US citizen you'll get taxed by US on the basis of your citizenship not residency. The treaty will provide you some relief from double taxation, but you have to go specifically item by item what's covered and to what extent, the default is that you owe money to both, both countries tax worldwide income.

Edit: the definition of resident that you find in Article 1 is the purposes of the treaty, like it says right there in the beginning, i.e. you might be considered a US-only resident for the calculation of tax relief benefits, but you'll still get taxed by CH as you live here.

Last edited by ivank; 10.08.2018 at 23:46.
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Old 10.08.2018, 23:28
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Re: Wealth tax, Zurich/Lausanne

I went through the articles in each one, and though it is sometimes hard to follow, my reading for each category of income that I would have is that the ability to tax for them is allocated to the US.
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Old 10.08.2018, 23:29
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Re: Wealth tax, Zurich/Lausanne

Dividends for one thing will definitely get taxed here, stocks are movable assets. You might owe more money on them to US than CH, that's why it's plausible that you won't have to pay anything extra here, but the tax liability is there
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Old 11.08.2018, 02:22
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Re: Wealth tax, Zurich/Lausanne

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Dividends for one thing will definitely get taxed here, stocks are movable assets. You might owe more money on them to US than CH, that's why it's plausible that you won't have to pay anything extra here, but the tax liability is there



As previously noted, my reading of Article 4 of the tax treaty is that I would be considered a US resident under the treaty.


Article 10 relates to dividends. Paragraph 1 specifies:

"Dividends derived and beneficially owned by a resident of a Contracting State may be taxed in that state. "



I read this to say that the US can tax my dividends.


As I read paragraph 2, Switzerland may tax my dividends if my dividends ""arise" in Switzerland. Since none of my dividends come from Swiss countries, it seems to me that paragraph would not entitle Switzerland to tax my dividends.
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