Go Back   English Forum Switzerland > Help & tips > Finance/banking/taxation  
Reply
 
Thread Tools Display Modes
  #1  
Old 23.05.2021, 14:54
Junior Member
 
Join Date: Oct 2019
Location: Zurich
Posts: 39
Groaned at 0 Times in 0 Posts
Thanked 6 Times in 5 Posts
AndyM has earned some respectAndyM has earned some respect
Witholding tax and double taxation philospohy

I think I misunderstood the double taxation agreements and I am curios if anybody has a better view.

I thought that when you already pay witholding tax in Switzerland, even if you are deemed as fiscal resident in another country that your wage income you will not be taxed in that country since your wage was already taxed in Switzerland at source.

But speaking with a friend I understood based on an analogy that it might be if the Swiss witholding tax is less than the other country income tax you might have to declare and pay the difference in the other country?

So basically you would be taxed by both countries on your wage? Doesn't seem fair since in Switzerland you are taxed less because you have to pay for almost everything whilst in other countries you pay more but the state offers a lot of public services in return. Seems that if it's true you would end up paying maximum of tax of the two countries whilst still having to pay in addition maximum for services which might be free in the other countries.

What is the reality and the reasoning behind it?
Reply With Quote
  #2  
Old 23.05.2021, 16:18
Guest
 
Posts: n/a
Re: Witholding tax and double taxation philospohy

Do a search for FATCA, it's been discussed here many times.

In brief, what you're describing is true for US citizens, yes; they still have to do a tax return in the US and potentially pay some tax there, if it's deemed that what's been paid in their country if residence is less than if they were living in the US.

Something like that anyway.

As far as I'm aware this is not true of any other nation, certainly not for the UK or any European countries.
Reply With Quote
The following 2 users would like to thank for this useful post:
  #3  
Old 23.05.2021, 16:26
Forum Legend
 
Join Date: Jul 2020
Location: Frick, Aargau
Posts: 2,876
Groaned at 62 Times in 50 Posts
Thanked 4,070 Times in 1,901 Posts
HickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond reputeHickvonFrick has a reputation beyond repute
Re: Witholding tax and double taxation philospohy

Quote:
Do a search for FATCA, it's been discussed here many times.

In brief, what you're describing is true for US citizens, yes; they still have to do a tax return in the US and potentially pay some tax there, if it's deemed that what's been paid in their country if residence is less than if they were living in the US.

Something like that anyway.

As far as I'm aware this is not true of any other nation, certainly not for the UK or any European countries.
I think it is only otherwise true for Eritrea.
Reply With Quote
This user would like to thank HickvonFrick for this useful post:
  #4  
Old 23.05.2021, 16:30
Junior Member
 
Join Date: Oct 2019
Location: Zurich
Posts: 39
Groaned at 0 Times in 0 Posts
Thanked 6 Times in 5 Posts
AndyM has earned some respectAndyM has earned some respect
Re: Witholding tax and double taxation philospohy

Quote:
Do a search for FATCA, it's been discussed here many times.
As far as I'm aware this is not true of any other nation, certainly not for the UK or any European countries.
I am referring to EU countries. From what I understand FATCA is only applicable to US.

So for EU countries this kind of double taxation of Swisswages with witholding plus income tax where you are deemed as tax resident is not happening?
Reply With Quote
  #5  
Old 23.05.2021, 16:37
Phil_MCR's Avatar
Forum Legend
 
Join Date: Oct 2009
Location: Basel
Posts: 14,954
Groaned at 295 Times in 199 Posts
Thanked 19,026 Times in 8,002 Posts
Phil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond reputePhil_MCR has a reputation beyond repute
Re: Witholding tax and double taxation philospohy

The principle is simple, you can get taxed in 2 ways:

1. At source e.g. where the income arises
2. By the country you are resident in
(in some cases also a third way: by the country you are a citizen of)

So if you have rental/interest income in Switzerland, for example, which is paid to, say, the UK where you are resident, then you can get taxed twice:

1. By tax being withheld by Switzerland (source income taxation is often withheld as that's the only way the country can secure the tax if you are not resident there)
2. On your income tax return in the UK

This way you can get taxed twice on the same income.

Sometimes countries sign a double tax agreement whereby one country gives up the right to tax that income in whole or part to relieve you from double taxation.

You need to look at the specific double tax agreement (if any) between the two countries concerned and see if there is any relief from double taxation.
__________________
By replying to this post, you hereby grant Phil_MCR a royalty-free license to use, in any way, anything posted by you on the internet. If you do not accept, stop using EF and delete your account.

Last edited by Phil_MCR; 02.06.2021 at 08:20.
Reply With Quote
The following 3 users would like to thank Phil_MCR for this useful post:
  #6  
Old 23.05.2021, 16:55
Jim2007's Avatar
Forum Legend
 
Join Date: Jun 2006
Location: Kt. Bern
Posts: 5,054
Groaned at 274 Times in 213 Posts
Thanked 8,283 Times in 3,652 Posts
Jim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond reputeJim2007 has a reputation beyond repute
Re: Witholding tax and double taxation philospohy

Double tax agreements have been negotiated with many countries, no just with the EU states. Taxation is no a shared sovereignty in the EU, so individual states may have different rules.

These agreements set out what happens in a situation where a person or legal entity is double taxed. It does not in itself prevent you from being double taxed.

These agreements provide some reliefs for people in situations where they are being double taxed, so that their burden is reduced, for example
- certain income is only taxed in the jurisdiction where it arises
- a partial or complete refund of withholding taxes
- calculation of income on a remittance basis
- calculation of income on a net basis
- credit for taxes paid in the other jurisdiction
- residence and domicile rules
- rules for resolving conflicts in individual cases
- defining exempt income
- rules for capital gains, inheritance and gift taxes
- and so on.
__________________
"There is no passion to be found playing small - in settling for a life that is less than the one you are capable of living." - Nelson Mandela
Reply With Quote
This user would like to thank Jim2007 for this useful post:
  #7  
Old 23.05.2021, 17:30
XDr's Avatar
XDr XDr is offline
Member
 
Join Date: Sep 2020
Location: Northeast
Posts: 211
Groaned at 5 Times in 5 Posts
Thanked 283 Times in 157 Posts
XDr has an excellent reputationXDr has an excellent reputationXDr has an excellent reputationXDr has an excellent reputation
Re: Witholding tax and double taxation philospohy

Check out https://www.sif.admin.ch/sif/en/home...sabkommen.html and from there, hopefully you can find your country at https://www.estv.admin.ch/estv/de/ho...n/laender.html. The FATCA monstrosity aside, Switzerland has worked hard at work out DTAs with an increasing number of countries. In almost all cases, there should be nothing due in the other country once you are settled full-year in Switzerland.
Reply With Quote
This user would like to thank XDr for this useful post:
  #8  
Old 23.05.2021, 22:46
Junior Member
 
Join Date: Mar 2010
Location: Wädenswil
Posts: 65
Groaned at 0 Times in 0 Posts
Thanked 61 Times in 19 Posts
angoose is considered knowledgeableangoose is considered knowledgeableangoose is considered knowledgeable
Re: Witholding tax and double taxation philospohy

I don't think this has anything to do with FATCA, unless you're a US citizen.

As Phil and Jim have explained, this relates to double taxation treaties.

In theory, if you have e.g. a property in one country and work in another, or you have properties in two countries, or whatever, you might be deemed to be tax resident in more than one country, under the domestic rules of those countries. Therefore, in order to avoid people paying tax in more than one country, there are double taxation treaties which set the rules for determining where you are tax-resident. Usually, this is where your "centre of vital interests" is.

So, if for example you work in Switzerland, but your partner or your children are in a different country (let's call it Country X), you might be tax resident in Country X under the treaty between Switzerland and Country X.

In that case, although your Swiss employer would likely deduct Swiss tax at source from all your income, you would also need to declare (a portion of) your Swiss income in Country X.

Usually under Article 15 (I think it's usually that article in most Treaties), Switzerland would have the right to tax your income for the days where you work in Switzerland, and Country X would tax your income for any other days, i.e. if you are working from home in Country X, or if you are travelling to a third country.

You would then need to declare that income in Country X, and you would reclaim the respective portion of your tax at source from Switzerland.

The bad news is that it takes a couple of years to get the reclaim from the Swiss authorities - or it does in Zurich anyway. I'm currently going through that pain. Indeed, I spent a few hours today responding to questions from the Zurich Cantonal tax office on the apportionment of my income
Reply With Quote
This user would like to thank angoose for this useful post:
  #9  
Old 23.05.2021, 23:00
fatmanfilms's Avatar
Forum Legend
 
Join Date: Apr 2010
Location: Verbier
Posts: 21,376
Groaned at 461 Times in 352 Posts
Thanked 23,091 Times in 11,824 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: Witholding tax and double taxation philospohy

Quote:
Do a search for FATCA, it's been discussed here many times.

In brief, what you're describing is true for US citizens, yes; they still have to do a tax return in the US and potentially pay some tax there, if it's deemed that what's been paid in their country if residence is less than if they were living in the US.

Something like that anyway.

As far as I'm aware this is not true of any other nation, certainly not for the UK or any European countries.
Residents in France would pay both UK & French CGT on selling UK rental property. The French tax is likely higher as it's based on purchase price without rebasing, although that depends on holding period. Currency changes could also create a profit in 1 currency & a loss in another.
Reply With Quote
  #10  
Old 24.05.2021, 20:51
Forum Legend
 
Join Date: Aug 2015
Location: Basle
Posts: 2,910
Groaned at 76 Times in 60 Posts
Thanked 2,025 Times in 1,178 Posts
Landers has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond reputeLanders has a reputation beyond repute
Re: Witholding tax and double taxation philospohy

Quote:

As far as I'm aware this is not true of any other nation, certainly not for the UK or any European countries.
I'm not sure what you mean by "this" as if you're tax resident in both Switzerland and the UK the same situation as the OP describes will arise.
Reply With Quote
This user would like to thank Landers for this useful post:
  #11  
Old 24.05.2021, 21:37
NotAllThere's Avatar
Modulo 2
 
Join Date: Oct 2008
Location: Baselland
Posts: 15,046
Groaned at 307 Times in 263 Posts
Thanked 23,227 Times in 9,433 Posts
NotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond reputeNotAllThere has a reputation beyond repute
Re: Witholding tax and double taxation philospohy

Quote:
View Post
But speaking with a friend I understood based on an analogy that it might be if the Swiss witholding tax is less than the other country income tax you might have to declare and pay the difference in the other country?
This is true. But it only applies if you're liable to pay tax in both countries.

For example, if you're UK resident and you leave the UK to work in Switzerland for a few years, but maintain significant economic links with the UK, you'll be liable in both countries and therefore, since UK tax is more in most cases than Swiss ones, you'll end up handing over to HMRC the difference.

But if leave your home country and move your economic based to Switerland, then the chances are, you won't (US and Eritrea excepting) be liable for tax in that country, so you'll pay nothing there.
__________________
Down with racism. Long live miscegenation!
Reply With Quote
This user groans at NotAllThere for this post:
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
Double taxation UK - Swiss Rossellac Finance/banking/taxation 5 16.01.2020 21:00
Double Taxation Penelopy Finance/banking/taxation 23 21.10.2017 23:46
Double taxation UK and CH Kph Finance/banking/taxation 2 04.01.2014 21:10
Double Taxation kakageroo Finance/banking/taxation 0 02.10.2012 20:54
www.frenchtaxonline.com and double taxation acrossthepond Finance/banking/taxation 0 02.09.2009 14:11


All times are GMT +2. The time now is 01:38.


Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2022, Jelsoft Enterprises Ltd.
LinkBacks Enabled by vBSEO 3.1.0