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Old 17.06.2020, 20:46
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U.S taxes - US-source income


I would think this would be fairly common problem but I haven't seen any discussion on it. I am a US citizen working for a Swiss company paying Swiss income tax. I went on a business trip to the US for a week thus generating US-source income.

As I understand US-sourced income is liable for US income tax. www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-special-issues mentions tax treaties to prevent double taxation in this case. So, now I have to read a tax treaty to figure out my taxes.
Based on that I thought I might be able to resource the income to Switzerland. However it seems from my reading of the treaty that, instead, Switzerland is responsible to exclude this income from tax. I can only resource income to cover any additional tax after the exclusion is taken.

Is there a consensus on here that that is the case? Does Switzerland provide this exemption? How do you apply for it?

For reference the parts from the treaty <www.irs.gov/pub/irs-trty/swiss.pdf> are mostly in Article 23, specially, paragraph 3 which says:

Where a resident of Switzerland is also a citizen of the US and is subject to US income tax in respect of profits, income or gains which arise in the US, the following rules apply:
a) Switzerland will apply paragraph 1 as if the amount of tax paid to the US in respect of such profits, income or gains were the amount that would have been paid if the resident were not a citizen of the US; and
b) for the purpose of computing the US tax on such profits, income or gains, the US shall allow as a credit against US tax the income tax paid or accrued to Switzerland after the application of subparagraph a), provided that the credit so allowed shall not reduce the amount of the US tax below the amount that is taken into account in applying subparagraph a); and
c) for the purpose of subparagraph b), profits, income or gains described in this paragraph shall be deemed to arise in Switzerland to the extent necessary to avoid double taxation of such income; however, the rules of this subparagraph shall not apply in determining credits against US tax for foreign taxes other than the taxes referred to in subparagraph 2 a) and paragraph 3 of Article 2 (Taxes Covered)

Paragraph 1 just basically says the remedy is to exclude the income from Swiss tax

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double taxation treaty, re-source income, us tax

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