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Old 05.03.2007, 20:36
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double taxation-- how to avoid? American working in CH

Hello all!

In the middle of contract negotitations for a position in Geneva.

Big question-- salary may be around CHF 180,000 a year. How do I avoid paying double tax? Has anyone had to *avoid* this as an American?

It is my understanding that we can exempt USD 82,000 on US tax return... that would leave about USD 70,000 that can be taxed.

I have also read that there is a way to exempt salary in CH as well, to avoid double taxation.

(ugh)

thanks to all in advance for pointers in this!!!
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Old 05.03.2007, 22:56
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Re: double taxation-- how to avoid? American working in CH

OK - the Readers' Digest Condensed version:

You take the $82,000 (ish, this amount is reduced by a pro-rated amount for any days spent working back in the US...) off the top. (That is, as long as our dear friends in Congress don't pull a fast one... they've tried that before, but Gott sei dank, failed. )

Then, you will take a credit for most of the tax you pay to Switzerland. I say most, because things like days spent working in the US could reduce that amount. Be aware that the Foreign Tax Credit may force you into the AMT, or you may owe capital gains, etc., depending on your situation so you still may owe US tax on some portion of your income. If your Foreign Tax Credit is greater than your US tax liability you can carry the credits over for - I think - 5 years.

Between the two countries, you usually end up paying at least what you would have owed to the US if you were still a US resident. Hopefully, not too much more.

That's a highly condensed version - there are pages and pages of fine print to wade through. I would strongly advise you to seek the services of a qualified Swiss/US tax consultant.

** If you are working for the UN, or some of the other international agencies there may be special rules/treaties, etc. Seek qualified advise.

Last edited by meloncollie; 06.03.2007 at 00:21.
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Old 05.03.2007, 23:18
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Re: double taxation-- how to avoid? American working in CH

Also, to add to the above, I think beginning with tax year 2006 or perhaps 2007, if your adjusted gross income is over the magic $82k/year (pro-rated, etc.), then you have to pay tax on the entire amount you earned, starting at $0 instead of $82k. Double taxation, definitely (And taxation without representation. Got any tea we can dump into a harbor?). Check with a qualified accountant or the IRS to be sure.
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Old 05.03.2007, 23:30
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Re: double taxation-- how to avoid? American working in CH

Quote:
Also, to add to the above, I think beginning with tax year 2006 or perhaps 2007, if your adjusted gross income is over the magic $82k/year (pro-rated, etc.), then you have to pay tax on the entire amount you earned, starting at $0 instead of $82k. Double taxation, definitely (And taxation without representation. Got any tea we can dump into a harbor?). Check with a qualified accountant or the IRS to be sure.
The change was backdated to the beginning of 2006. Under prior tax law you were only liable after $80,000 (?). The $80,001 = $1. The new tax law exempts you up to $82,400 (?), but $82,401 = $82,401! This is a real kick in the balls, but it allowed the Republicans to cut taxes more at home at the expensive of us unpatriotic Americans (I posted the numbers on here a few times before, I forget the exact ones and I am too lazy to check.)

Also, I believe that you need to be a resident in Switzerland for 330 days before this exemption takes effect. I have never heard of one not only being able to take this exemption, but being allowed to deduct local (i.e. foreign) taxes as well. I believe that expats from the US are required to choose between these two options, but there is a very good chance that I am wrong.

http://www.irs.gov/businesses/small/...nal/index.html
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Old 06.03.2007, 00:27
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Re: double taxation-- how to avoid? American working in CH

spmull06,

Sorry, it's called the Foreign Tax Credit (or something very similar), not the FEIC... I've edited my post.

Anyway, still works the same. Switzerland and the US have tax treaties to reduce double taxation, hence you can claim credit for taxes paid to your host country. (Minus the fine print, blah blah blah...) And you can claim the exclusion, too.

Also there is some play in the way your qualification as an overseas resident is counted.. physical presence vs bonafide resident, IIRC.

BUT... Speak to a qualified tax advisor before you sign on the dotted line. You do need to so some tax planning with respect to your indivual situation and the tax laws of the two countries before you make the move.
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Old 06.03.2007, 00:41
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Re: double taxation-- how to avoid? American working in CH

Quote:
spmull06,

Sorry, it's called the Foreign Tax Credit (or something very similar), not the FEIC... I've edited my post.

Anyway, still works the same. Switzerland and the US have tax treaties to reduce double taxation, hence you can claim credit for taxes paid to your host country. (Minus the fine print, blah blah blah...) And claim the exclusion.

Also there is some play in the way your qualification as an overseas resident is counted.. physical presence vs bonafide resident, IIRC.

BUT... Speak to a qualified tax advisor before you sign on the dotted line. You do need to so some tax planning with respect to your indivual situation and the tax laws of the two countries before you make the move.
Ok, sorry. I didn't mean to challenge what you said, and as I said in my own post I could very well be wrong (and I seriously meant that -- it wasn't meant to sound hostile!). I got the feeling that the treaties you are referring to deal with SS and Medicare? If there is an income tax treaty beyond that with Switzerland, I'd be interested in learning more about it for personal (not economic) reasons. I am sorry I did not come across them before.

I get the feeling that providing that web address was probably a mistaken -- I only did so to help.
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Old 06.03.2007, 01:31
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Re: double taxation-- how to avoid? American working in CH

Here is the IRS publication on the foreign tax credit for individuals, including form 1116...

http://www.irs.gov/pub/irs-pdf/p514.pdf

On the tax treaty with Switzerland:

http://www.irs.gov/pub/irs-trty/swistech.pdf

But I'm certainly not an expert - that's why I pay an advisor.
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Old 06.03.2007, 03:09
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Re: double taxation-- how to avoid? American working in CH

I can add a little more detail as well.

--You can take the exclusion plus offest additional taxes by what you have paid in Swiss taxes. However, you can only use Swiss taxes that you paid on the amount *above* the exclusion, not Swiss taxes on the excludible amount.

--Housing allowances are now taxed differently (and much more) than they were previously, albeit Geneva enjoys quite a high ceiling (unlike Zurich and most of the rest of the country, mainly because IRS staffers appear to be lazy gits).

--Other benefits, such as private school tuition, may also be taxable.

If you are looking at a big package of benefits above and beyond your salary, it may make sense to try to get tax equalization. As the others have said, you should definitely consult a qualified tax advisor.
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Old 06.03.2007, 08:48
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Re: double taxation-- how to avoid? American working in CH

Also check the American Citizens Abroad web site http://www.aca.ch/index.htm There's a Taxation link on the left side.

If you go over the magic number you are not taxed on the entire amount. The amount is used to calculate your marginal tax rate - from the site:

Quote:
The potentially most expensive change for Americans overseas provides that income and housing expense excluded for tax purposes must be included for purposes of determining the marginal tax rate on other taxable income.
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Old 06.03.2007, 11:15
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Re: double taxation-- how to avoid? American working in CH

Quote:
...but it allowed the Republicans to cut ...
You've been shafted by all flavours of government, no?

Didn't the Republicans prevent Clinton shafting you further back in 1996?
Didn't Reagan reverse some of Carter's changes to the section 911?

What about facts, not political dogma...
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Old 06.03.2007, 11:56
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Re: double taxation-- how to avoid? American working in CH

Quote:
You've been shafted by all flavours of government, no?

Didn't the Republicans prevent Clinton shafting you further back in 1996?
Didn't Reagan reverse some of Carter's changes to the section 911?

What about facts, not political dogma...
Uhm, the fact is that the Republicans controlled both chambers of Congress in the early summer of 2006 when they passed this tax increase on Americans living abroad in a tax cut that was worth around $70 billion for those still in the homeland. I've posted links to it before on here, am not going to bother to do so again. You're welcome to imagine I am making this up.

If you want to talk about tax policy, why not start with the fact that it was it JFK who started reducing the top tax bracket during his short presidency? I am more than able to begin debating this without using Wikipedia. And the 1986 Tax Reform Act was originally the idea of Bill Bradley -- a Democrat. If you don't know who he is, he tried, unsuccessfully, to run for president as a Democrat against Al Gore in 2000. Check out this book -- http://www.amazon.com/Showdown-Gucci...3174942&sr=8-1 --- it is a very good and informative read. If you want to get more into tax policy, I'll gladly send along more recommendations. You can do the same.
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Old 06.03.2007, 12:17
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Re: double taxation-- how to avoid? American working in CH

You haven't actually acknowledged what I've said: You've resorted to dogma again.
Any facts can be chosen to support your position, any facts can be chosen to support my statements.

Incidently, the info that I posted came from one of the links above...

Anyway, who cares? I'm a Brit and pay tax only in Switzerland.
Edit: I posted only to point out you've been shafted across the board by all parties for decades, it didn't happen recently

Quote:
Uhm, the fact is that the Republicans controlled both chambers of Congress in the early summer of 2006 when they passed this tax increase on Americans living abroad in a tax cut that was worth around $70 billion for those still in the homeland. I've posted links to it before on here, am not going to bother to do so again. You're welcome to imagine I am making this up.

If you want to talk about tax policy, why not start with the fact that it was it JFK who started reducing the top tax bracket during his short presidency? I am more than able to begin debating this without using Wikipedia. And the 1986 Tax Reform Act was originally the idea of Bill Bradley -- a Democrat. If you don't know who he is, he tried, unsuccessfully, to run for president as a Democrat against Al Gore in 2000. Check out this book -- http://www.amazon.com/Showdown-Gucci...3174942&sr=8-1 --- it is a very good and informative read. If you want to get more into tax policy, I'll gladly send along more recommendations. You can do the same.
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Old 06.03.2007, 12:29
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Re: double taxation-- how to avoid? American working in CH

Quote:
You haven't actually acknowledged what I've said: You've resorted to dogma again.
Any facts can be chosen to support your position, any facts can be chosen to support my statements.

Incidently, the info that I posted came from one of the links above...

Anway, who cares? I'm a Brit and pay tax only in Switzerland.
I know you don't care, which is why I don't understand what drove you to respond. Why should I get into a lot of crap the initiator of this thread does not care about?

Also, it is not dogma to state that the bill passed in 2006 was a Republican one -- it would not have come into existence under the current Congress.

I've read the edit: it is pretty easy to find deductions... And the US has had lower taxes (when compared to the UK) for quite some time if I am not mistaken. It is just bloody ridiculous that they want to tax all green card holders and citizens when they're not even earning money in the States. The new changes were a huge tax hike. Previously you would have had to be an executive to be badly impacted by it.

You know, that Tax Reform in 1986 is pretty interesting. It slashed the rates, but was revenue neutral. There are so many loopholes in US tax law that it is literally like "Swiss cheese." The reason the rates are higher again is because they've simply reintroduced deductions -- that is how one can "avoid" double taxation. (The policy is bipartisan.)
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Old 11.03.2007, 13:24
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Re: double taxation-- how to avoid? American working in CH

thanks for all of the pointers!

I am now looking for a tax advisor, now that we have gotten the *meat* of the contract out of the way (gotta love salary negotiations).

Still have yet to sign on the dotted line, there are a couple more things that need to be negotiated. And I do realize that only USD 82,000 can be exempted, and from there we are taxed (yes... uh, wasn't taxation an issue for the US, say, back in 1776?). Yes, we are the only country to tax our citizens when earning incomce world wide, even as a resident of another country! blech!
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Old 11.03.2007, 13:31
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Re: double taxation-- how to avoid? American working in CH

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Yes, we are the only country to tax our citizens when earning incomce world wide, even as a resident of another country! blech!
Libya also do this... and that's it.
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Old 11.03.2007, 14:03
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Re: double taxation-- how to avoid? American working in CH

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Yes, we are the only country to tax our citizens when earning incomce world wide, even as a resident of another country! blech!
Actually it's worse than that. It also applies to anyone who has been resident (also non-citizens) for 10 years after they stop being resident. Basically citizens never escape (unless renouncing citizenship), and residents escape 10 years after leaving the US. An important consideration for anyone taking a green card or work visa!

Just how the US would plan to tax non-resident non-citizens is interesting, but them's the rules....
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Old 11.03.2007, 14:07
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Re: double taxation-- how to avoid? American working in CH

sick, sick, sick it is. Geez, "taxation without representation" for sure!
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Old 11.03.2007, 14:14
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Re: double taxation-- how to avoid? American working in CH

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Actually it's worse than that. It also applies to anyone who has been resident (also non-citizens) for 10 years after they stop being resident. Basically citizens never escape (unless renouncing citizenship), and residents escape 10 years after leaving the US. An important consideration for anyone taking a green card or work visa!

Just how the US would plan to tax non-resident non-citizens is interesting, but them's the rules....
And it gets even slightly worse. If they believe you gave up your citizenship for tax reasons, they will tax you for life anyway.
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Old 12.03.2007, 13:11
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Re: double taxation-- how to avoid? American working in CH

Off topic - but only slightly...

FYI for US expats, it seems that Congress has established an Americans Abroad Caucus:

http://www.iht.com/articles/2007/03/...cus.php?page=1

It's a step in the right direction for getting our concerns as Americans living overseas heard - though I'm not holding out much hope of seeing much change anytime soon.

But, at least there is recognition that millions of expatriate Americans could have some potential for political impact...

So, if you are adversely affected by the new tax rules, or anything else affecting expatriates for that matter, why not write to one of the new caucus members?

And please, don't forget to register as an overseas voter - and don't forget to vote!
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Old 29.03.2007, 00:59
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Double taxation | What Forms to File American working in CH

Hi All,

I moved last fall from Chicago to Zug for an indefinite periode. Currently I am filling in my tax forms.

What forms would I fill in to avoid double taxation? Form 2555 does not seem to apply.

Any help would be greatly appreciated.

Thank you very much
Gemini
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