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Old 26.02.2021, 15:24
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UK pension and CH taxes

In 2020, I was a posted worker from the UK to CH, meaning I was paying social security (NIC) in the UK and should pay the tax in Switzerland.

In the UK, I have a group personal pension, where my employer contributes some amount every month and I decided to contribute more (which, in the UK would be tax free).

The tax period being around the corner, I am trying to figure out how should I report different contributions for Swiss taxes. I think that:

1. In Switzerland, AVS (pillar 1) is deducted from the income, and my NIC contributions should be considered the same (based on the Schumacker principle).

2. From art. 18 of Swiss-UK DTA, I think the contributions to the GPP should be tax free, but I'm not sure if I should consider them pillar 2 or pillar 3a (for pillar 2 all of it would be tax-free and for pillar 3a only ~6k CHF or can I use the self-employed limit of ~25 CHF?)

3. Should I consider employer's and mine contributions to the GPP in a different way?

4. Should I consider the assets in the GPP as wealth taxable in Switzerland? I understand Swiss pensions assets are typically exempt, but the DTA above mentions it's only applied to income taxes.

Any idea whether these are accurate? I skimmed through the great pinned thread on pensions, but didn't find directly useful info there.
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Old 26.02.2021, 15:30
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Re: UK pension and CH taxes

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In 2020, I was a posted worker from the UK to CH, meaning I was paying social security (NIC) in the UK and should pay the tax in Switzerland.

In the UK, I have a group personal pension, where my employer contributes some amount every month and I decided to contribute more (which, in the UK would be tax free).

The tax period being around the corner, I am trying to figure out how should I report different contributions for Swiss taxes. I think that:

1. In Switzerland, AVS (pillar 1) is deducted from the income, and my NIC contributions should be considered the same (based on the Schumacker principle).

2. From art. 18 of Swiss-UK DTA, I think the contributions to the GPP should be tax free, but I'm not sure if I should consider them pillar 2 or pillar 3a (for pillar 2 all of it would be tax-free and for pillar 3a only ~6k CHF or can I use the self-employed limit of ~25 CHF?)

3. Should I consider employer's and mine contributions to the GPP in a different way?

4. Should I consider the assets in the GPP as wealth taxable in Switzerland? I understand Swiss pensions assets are typically exempt, but the DTA above mentions it's only applied to income taxes.

Any idea whether these are accurate? I skimmed through the great pinned thread on pensions, but didn't find directly useful info there.
I would certainly be arguing that it is equivalent to pillar 2. I doubt you will get any pushback. My wife and I are making contributions into a SIPP and will try and argue that these should be deducted from our taxable income.

Last edited by HickvonFrick; 26.02.2021 at 15:48.
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Old 26.02.2021, 15:41
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Re: UK pension and CH taxes

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I would certainly be arguing that it is equivalent to pillar 2. I doubt you will get any pushback. My wife and I are making contributions into a SIPP and will try and argue that these should be deducted from our taxable income.
That sounds awesome, thanks! Will you also report the assets in the SIPP as wealth? Why not (ie. on what grounds)?
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Old 26.02.2021, 15:50
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Re: UK pension and CH taxes

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That sounds awesome, thanks! Will you also report the assets in the SIPP as wealth? Why not (ie. on what grounds)?
The SIPP assets are held in trust so do not belong to you or your estate if you die, so should not be shown.

Since there would be a tax charge if you removed the entire fund, even if you were to show it you would have to show the tax liability, however you don't.
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Old 26.02.2021, 16:06
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Re: UK pension and CH taxes

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I would certainly be arguing that it is equivalent to pillar 2. I doubt you will get any pushback. My wife and I are making contributions into a SIPP and will try and argue that these should be deducted from our taxable income.
Let us know how that goes. I don‘t think that will be tax exempt in Switzerland. At the end of the day it‘s just a less regulated version of a pillar 3. I can‘t see why they would incentivise it, otherwise we‘d all be doing it.

Why are you paying into a SIPP when there are no capital gains in Switzerland and wealth taxes are minimal. Is it just because you think you can convince the tax authorities to make it tax exempt?
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Old 26.02.2021, 16:09
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Re: UK pension and CH taxes

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Let us know how that goes. I don‘t think that will be tax exempt in Switzerland. At the end of the day it‘s just a less regulated version of a pillar 3. I can‘t see why they would incentivise it, otherwise we‘d all be doing it.

Why are you paying into a SIPP when there are no capital gains in Switzerland and wealth taxes are minimal. Is it just because you think you can convince the tax authorities to make it tax exempt?
As stated above, it is made clear in Article 18 of the UK-CH pension agreement that: https://assets.publishing.service.go...s_in_force.pdf that:


(3) Contributions made by or on behalf of an individual who exercises
employment or self-employment in a Contracting State (‘the host state’) to a pension scheme
that is recognised for tax purposes in the other Contracting State (‘the home state’) shall, for
the purposes of:
(a) determining the individual’s tax payable in the host state; and
(b) determining the profits of his employer which may be taxed in the host state;
be treated in that State in the same way and subject to the same conditions and limitations as
contributions made to a pension scheme that is recognised for tax purposes in the host state
,
to the extent that they are not so treated by the home state.

As I don't pay any income tax in the UK, my contributions don't "determine my tax payable in the home state". Thus, they should be tax deductible in Switzerland. I haven't made any pillar 3a contributions yet in 2021. I will ask my accountant whether the SIPP would be equivalent to pillar 2 or pillar 3a. I certainly will try and argue the former, and see if he thinks I will have any prospect of success. As we say in the north-east "shy bairns get nowt". Ultimately some of the money in there was originally contributed by my UK employer - a factor which makes it more pillar 2 like. Really its a combination of pillars 2 and 3a. I certainly don't think it is fradulent to push for pillar 2 like status.

Even if it is equivalent to pillar 3a - I'd rather have it in a SIPP than 3a due to the investment flexibility.

Last edited by HickvonFrick; 26.02.2021 at 16:43.
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Old 26.02.2021, 16:56
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Re: UK pension and CH taxes

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As stated above, it is made clear in Article 18 of the UK-CH pension agreement that: https://assets.publishing.service.go...s_in_force.pdf that:


(3) Contributions made by or on behalf of an individual who exercises
employment or self-employment in a Contracting State (‘the host state’) to a pension scheme
that is recognised for tax purposes in the other Contracting State (‘the home state’) shall, for
the purposes of:
(a) determining the individual’s tax payable in the host state; and
(b) determining the profits of his employer which may be taxed in the host state;
be treated in that State in the same way and subject to the same conditions and limitations as
contributions made to a pension scheme that is recognised for tax purposes in the host state
,
to the extent that they are not so treated by the home state.

As I don't pay any income tax in the UK, my contributions don't "determine my tax payable in the home state". Thus, they should be tax deductible in Switzerland. I haven't made any pillar 3a contributions yet in 2021. I will ask my accountant whether the SIPP would be equivalent to pillar 2 or pillar 3a. I certainly will try and argue the former, and see if he thinks I will have any prospect of success. As we say in the north-east "shy bairns get nowt". Ultimately some of the money in there was originally contributed by my UK employer - a factor which makes it more pillar 2 like. Really its a combination of pillars 2 and 3a. I certainly don't think it is fradulent to push for pillar 2 like status.

Even if it is equivalent to pillar 3a - I'd rather have it in a SIPP than 3a due to the investment flexibility.
You might have a shout with pillar 3, but I can‘t see how you‘d claim any equivalence to pillar 2.
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Old 17.03.2021, 22:51
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Re: UK pension and CH taxes

I think the problem with a SIPP as pillar 2 is that you get tax relief from HMRC directly into the SIPP. Employer contributions to pensions tend to be deducted net pay, so before tax. That way is the way it is done in many EU countries, and that is what they call Tax fiscalisation of pension contributions.

I do not think the HMRC way of topping up the SIPP with 20%, and anyone who is a higher rate payer needing to claim the rest manually is consistent with pillar 2. It looks much more like pillar 3a, where you also manually need to claim tax back.

Just my 2 cts.

Unless your employer deducted the SIPP pension before they applied tax? But you might still struggle, mostly since SIPPS are stored with investment companies like Fidelity, which does not look much like a pension fund
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