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-   -   tax / social security / pension obligations (https://www.englishforum.ch/finance-banking-taxation/4259-tax-social-security-pension-obligations.html)

22.02.2007 21:27

tax / social security / pension obligations
 
hiya

just trying to get a clear outline of what my financial obligations are (will be) once i start working in switzerland, and on whether or not it's possible to offset/reclaim any of these later. have read posts in this forum, as well as the excellent http://www.rebgasse.com/reblog/?page_id=59, but missing some jigsaw pieces and not sure of current position re: bilateral agreements. would be very grateful if someone could run a quick sanity check on the following and let me know what's wrong, missing etc

This is what i *think* I have to pay, but i'm not clear on the how/when/if of claiming/reclaiming/offsetting:

PENSION: 1st pillar [mandatory]
AHV - Old Age and Survivorsí Insurance
IV - Disability Insurance
EO - Compulsory Income Regulations (?)
ALV - Unemployment Insurance
KV - Private Health Insurance, possible to offset against gym subs

PENSION: 2nd pillar [mandatory]
UVG - Accident Insurance
BVG - Occupational Pension

INCOME TAX: at source, can be offset against (eg) UK tax obligations
CHURCH TAX: at source, can be reclaimed

incidentally, I'm EU, L permit, and will be employed in Zurich as an individual (via an umbrella), and i expect to be paying full tax and NI in the UK for the duration of my time in switzerland...

thanks...

LongJohn 22.02.2007 22:56

Re: tax / social security / pension obligations
 
Following on from what you say, I have a question: I am on the verge of accepting a good job in Zurich, which means a move from the UK.

I haven't built up a lot of pension contributions in the UK, so even tho' the Swiss company pension scheme is OK, I won't have built up enough contributions by the time I retire (10-15 yrs time) to avoid being below the poverty line.

Is there supplementary benefits scheme available in Switzerland that would help to maintain a basic level of dignity in retirement?

regards

LongJohn

Raclette 23.02.2007 11:42

Re: tax / social security / pension obligations
 
You can make additonal payments to the 2nd pillar to bring you to the highest pension level...

Richard 23.02.2007 11:56

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by LongJohn
Following on from what you say, I have a question: I am on the verge of accepting a good job in Zurich, which means a move from the UK.

I haven't built up a lot of pension contributions in the UK, so even tho' the Swiss company pension scheme is OK, I won't have built up enough contributions by the time I retire (10-15 yrs time) to avoid being below the poverty line.

Is there supplementary benefits scheme available in Switzerland that would help to maintain a basic level of dignity in retirement?

regards

LongJohn

Let me answer this question first before tackling the previous one. IF you are going to be working here and I assume you are ca 50 by the sound of your retirement objectives then you will actually be able to accumulate quite a nest egg.
You have three pillars - state scheme which will not over 15 years pay out much.
Company pension scheme which will given your age contribute a minimum of 15% of your annual salary into a pension fund. PLUS you can contribute tax free to the maximum pension your salary will permit - this can be a good tax avoidance vehicle.
Third pillar which is an alternative private tax beneficial scheme. This can then be invested in funds to bring a reasonable return. Here you should be able to accumulate over 15 years well over 100K - current max contribution is 6365 but this increases annually.

So overall based on a salary of circa 100K per year you can expect to have accumulated some 350-400K for your pension plus AHV of perhaps 10K per year. The accumulated pension can then be paid out as a lump sum but it is taxable - ca 7%.

If you search in this forum you will find plenty about how this works etc.

Richard 23.02.2007 12:15

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by kiki
hiya

just trying to get a clear outline of what my financial obligations are (will be) once i start working in switzerland, and on whether or not it's possible to offset/reclaim any of these later. have read posts in this forum, as well as the excellent http://www.rebgasse.com/reblog/?page_id=59, but missing some jigsaw pieces and not sure of current position re: bilateral agreements. would be very grateful if someone could run a quick sanity check on the following and let me know what's wrong, missing etc

This is what i *think* I have to pay, but i'm not clear on the how/when/if of claiming/reclaiming/offsetting:

PENSION: 1st pillar [mandatory]
AHV - Old Age and Survivorsí Insurance
IV - Disability Insurance
EO - Compulsory Income Regulations (?)
ALV - Unemployment Insurance
KV - Private Health Insurance, possible to offset against gym subs

PENSION: 2nd pillar [mandatory]
UVG - Accident Insurance
BVG - Occupational Pension

INCOME TAX: at source, can be offset against (eg) UK tax obligations
CHURCH TAX: at source, can be reclaimed

incidentally, I'm EU, L permit, and will be employed in Zurich as an individual (via an umbrella), and i expect to be paying full tax and NI in the UK for the duration of my time in switzerland...

thanks...

Well you have been reading but it is not quite the whole picture, so lets look at this.


AHV/IV/EO comes as a single package of 5.05% up to 106,800 - thereafter it is peanuts.

Unemployment insurance is some 1-2% of income and
Health insurance is extremely variable - visit comparis.ch to get an idea of what you are likely to pay. note this varies according to where you live. Furthermore, the private part is probably not what you think. There is an obligation to have minimum insurance which covers many things and although you pay for this it is not private. Private demands a premium to the obligatory health insurance.
Accident insurance belongs to your deductions above and not to your pension scheme. When you are employed your employer is obliged to pay the working accidents part of this and almost without exception the whole of this is paid.

The company pension scheme is defined by the company but must at least exceed the minimum. This is to be found in many sources and it increases according to age. Your contribution also is variable but you can reckon with between 5 and 8% assuming you are over 25. Under 25 it is not really a pension but an insurance...

Income tax is usually at source for newcomers to Switzerland. You should be very careful with respect to hopeful offsets. These usually result in a higher final tax amount here or sub optimal tax planning.
Church tax is optional. You can if you are spiritually inclined register a religion or you can claim to have none in which case this does not apply. I am not sure what you are referring to with can be reclaimed - once paid the money has been transferred to the church finito - you can reclaim it first in heaven.


To reclaiming. You can reclaim tax paid by completing a tax form at the end of the year, electing to be tax not at source, buy property or get a c permit. Once you take this step it is an annual requirement from which you are never freed.


The offsetting is within the Swiss system and you should be very careful about including foreign elements as these usually result in a higher tax burden unless you are very careful - life insurance policies etc are fine, but mortgages usually return to bite with income and capital tax.


You missed out 3rd pillar which you do not have to pay but you would be daft not to as it is very tax efficient.

Be specific if you want more information ie ask pointed questions.

tts 23.02.2007 12:23

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by Richard
Church tax is optional. You can if you are spiritually inclined register a religion or you can claim to have none in which case this does not apply.

That's my understanding too. If you are Church of England there is a CoE Church in Zurich, and others in surrounding areas, but apparently they do not get money from the Church Tax system, so don't pay it thinking you are doing them some good.

Quote:

I am not sure what you are referring to with can be reclaimed - once paid the money has been transferred to the church finito - you can reclaim it first in heaven.
:)

muze7 24.02.2007 01:05

Re: tax / social security / pension obligations
 
Quote:

Income tax is usually at source for newcomers to Switzerland. You should be very careful with respect to hopeful offsets. These usually result in a higher final tax amount here or sub optimal tax planning.
1- Richard, you explained that one scenario of higher final amounts is if you try to use foreign income, but what if people have a clear cut case, with only one Swiss salary and nothing else, no property etc.? Would it then in most cases be worthwile to file a tax form as you can then use standard offsets like travel, medical bills? etc., or is it likely you still need to pay more rather than less?

2- What do you mean by sub optimal tax planning?

3- I heard also a rumour that if you are foreigner and try to reclaim tax by filing one yourself, you are more likely to get slapped than if you use a treuhand (tax person) as the tax office assumes they know what they are doing and are more likely to accept the claims. Is this true?

Quote:

Church tax is optional. I am not sure what you are referring to with can be reclaimed - once paid the money has been transferred to the church finito
hmm, I heard you can reclaim up to three years after you paid, and that each kanton has a form for this specifically, and also, that you cannot opt out of paying it at the start if you are taxed at the source, so that this is the only way to go about it.

johntaggert 24.02.2007 16:34

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by Richard
To reclaiming. You can reclaim tax paid by completing a tax form at the end of the year, electing to be tax not at source, buy property or get a c permit. Once you take this step it is an annual requirement from which you are never freed.

You can use the form Korrekturberechnung der Quellensteuer to reclaim taxes paid. This (http://www.steueramt.zh.ch/html/form...ntrag-e01r.pdf) is the one for Kanton Zurich. This seems to be pretty straightforward, not?

25.02.2007 23:06

Re: tax / social security / pension obligations
 
thanks richard, and apologies for being a little non-specific - i'm only just getting to the point where i know what i don't know(!)
my questions mostly already covered by muze7, but i'd be grateful if you could clarify a couple of things specific to my current situation:

Quote:

Income tax is usually at source for newcomers to Switzerland. You should be very careful with respect to hopeful offsets. These usually result in a higher final tax amount here or sub optimal tax planning.
i'm expecting to be working in switzerland (for a swiss company, on a contract basis) for 6-12 months, and my understanding is that that i will be expected to pay full income tax in both switzerland and the UK for the duration of this time, but that i can offset the swiss tax against my UK tax. for example, if my swiss income tax bill was £10000 and my UK income tax bill was £15000, i would only owe UK HMRC the difference of £5000.

are you saying that attempting to claim this offset is unlikely to be financially sensible? (or were you talking about offset from a swiss perspective?) i do have a UK mortgage, but i'm not sure that's relevent here(?)

regarding non-tax obligations (ie pension/NI): can you tell me if i am also obliged to pay NI in the UK for the length of my stay in switzerland, and if so, whether or not i can offset it against NI-type(?) payments i am obliged to pay in switzerland (as per the income tax example). and if I am paying swiss pension contributions, does this mean i can subsequently claim a pension from the swiss government in later life?

lastly, if i'm being taxed at source in switzerland, does this mean that i am not obliged to submit a tax return in switzerland, or to declare UK assets in any way?

thanks...

gbn 26.02.2007 07:39

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by kiki
i'm expecting to be working in switzerland (for a swiss company, on a contract basis) for 6-12 months, and my understanding is that that i will be expected to pay full income tax in both switzerland and the UK for the duration of this time, but that i can offset the swiss tax against my UK tax. for example, if my swiss income tax bill was £10000 and my UK income tax bill was £15000, i would only owe UK HMRC the difference of £5000.

The only bit I can help with... yes, you'll pay HMRC the difference.
A friend went back to the UK after a contract of 9 months or so and was hit by this.

Richard 27.02.2007 07:30

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by kiki
thanks richard, and apologies for being a little non-specific - i'm only just getting to the point where i know what i don't know(!)
my questions mostly already covered by muze7, but i'd be grateful if you could clarify a couple of things specific to my current situation:



i'm expecting to be working in switzerland (for a swiss company, on a contract basis) for 6-12 months, and my understanding is that that i will be expected to pay full income tax in both switzerland and the UK for the duration of this time, but that i can offset the swiss tax against my UK tax. for example, if my swiss income tax bill was £10000 and my UK income tax bill was £15000, i would only owe UK HMRC the difference of £5000.

are you saying that attempting to claim this offset is unlikely to be financially sensible? (or were you talking about offset from a swiss perspective?) i do have a UK mortgage, but i'm not sure that's relevent here(?)

regarding non-tax obligations (ie pension/NI): can you tell me if i am also obliged to pay NI in the UK for the length of my stay in switzerland, and if so, whether or not i can offset it against NI-type(?) payments i am obliged to pay in switzerland (as per the income tax example). and if I am paying swiss pension contributions, does this mean i can subsequently claim a pension from the swiss government in later life?

lastly, if i'm being taxed at source in switzerland, does this mean that i am not obliged to submit a tax return in switzerland, or to declare UK assets in any way?

thanks...

Sorry for the tardy response. Okay it all depends how long you stay here and how you want to play it. If you are genuinely staying here for just 6 months it is different to staying here just 12 months... And also for UK tax purposes the when is important. Firstly you are obliged to pay NI equivalent here. You can manage for the short period you are here to avoid the Swiss health system. Quickly sign up with BUPA to do that. You can then claim exemption on the grounds that you are only intending to stay here for a short time. This enters the discussion domicile and residence.

You actually have the option to pay UK tax but as long as you are out of the country long enough must not pay it. You will lose out with respect to the mortgage relief but gain more than enough on the difference between the two systems as long as you are not working in the valleys somewhere or earning in excess of 300K. You need to check this out also the rules for exemption. The only time you will not be able to exempt yourself is when you are a uk company but then you can exempt yourself here more or less or get in to other tax avoidance schemes.

No the requirement for tax returns is based on your pro rata income but they are hardly likely to hit you with a tax bill once you have left given you are PAYE.

You can claim a Swiss pension after 2 years contributions and are able to contribute in absentia. If there are more questions it might be better to PM me.

27.02.2007 13:01

Re: tax / social security / pension obligations
 
thanks richard, that's been very helpful. i may well have a couple more questions off the back of this last (the hydra springs to mind...), but if i can't fix 'em myself i'll go down the PM route. cheers

jenny 27.02.2007 23:21

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by Raclette
You can make additonal payments to the 2nd pillar to bring you to the highest pension level...

I think if you do some sums you'll see that you're better off taking out a 3rd pillar than paying even more into the 2nd pillar/LPP system...

muze7 28.02.2007 14:36

Re: tax / social security / pension obligations
 
Quote:

You can claim a Swiss pension after 2 years contributions and are able to contribute in absentia.
Richard, do you mean if you paid into your pension for two years, and then leave, and never pay again while you are in absentia overseas that those two years contributions are lost forever?

I am asking because I am paying both my own contributions as well as the employer's contributions, and don't want to lose this, as this is the only pension I ever accumulated so far :msneek:

Richard 01.03.2007 08:09

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by muze7
Richard, do you mean if you paid into your pension for two years, and then leave, and never pay again while you are in absentia overseas that those two years contributions are lost forever?

I am asking because I am paying both my own contributions as well as the employer's contributions, and don't want to lose this, as this is the only pension I ever accumulated so far :msneek:

Sorry I was perhaps not very clear. There is no such thing as a simple pension in Switzerland... You have 1st pillar, 2nd pillar and 3rd pillar. The two year qualifying is for the 1st pillar. And that is where you can continue to pay. You can also buy "lost years"...

jojo 01.03.2007 10:01

Re: tax / social security / pension obligations
 
Hi,
when I left Switzerland about 17 years ago I`m sure I cashed in some of my pension. Would that have been 1st or 2nd pillar anyone know?
How many lost years can I buy back when I return later this year?

AbFab 01.03.2007 10:05

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by jojo
Hi,
when I left Switzerland about 17 years ago I`m sure I cashed in some of my pension. Would that have been 1st or 2nd pillar anyone know?
<snip>

I think it's clairvoyant you want, love.

Or is a competition? Should we guess?

jojo 01.03.2007 10:17

Re: tax / social security / pension obligations
 
Hi
first one to guess correctly wins.....
No I meant can you take out both or all when you leave

Richard 01.03.2007 14:21

Re: tax / social security / pension obligations
 
You cannot currently cash in your AHV as an EU citizen but you can transfer it to your country scheme - highly recommended especially for Germans, French, Italians... Being more serious as I believe Scotland was a part of the EU back then you have cashed in your BVG aka LPP aka 2nd Pillar aka company pension scheme (trying to keep Mark happy). When you rejoin the Swiss scheme they will, or better said should give you back your old AHV number and the bill to repay the BVG amount that you cashed in.

bill_door 25.04.2008 12:58

Re: tax / social security / pension obligations
 
Quote:

Originally Posted by Richard (Post 38422)

The company pension scheme is defined by the company but must at least exceed the minimum. This is to be found in many sources and it increases according to age. Your contribution also is variable but you can reckon with between 5 and 8% assuming you are over 25. Under 25 it is not really a pension but an insurance...

Hi Richard,

I've been through so many of your posts this morning that have helped so much, I think you deserve a medal for being able to provide concise clear info. Thanks.

One thing I am trying to sort relates to the above. Do you have any links (federal directive, law, etc) on what the min / max contribs can be an d what are the obligations for an employer in relation to a company pension scheme. And if possible can you elaborate on the differences for permanent employees and contractors.


TIA, Bill


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