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Old 08.03.2007, 18:49
Shimla
 
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Zurich London Commute [double taxation question]

I am English, my wife is Swiss and we are shortly to move to Switzerland. I will remain working in London for four days a week and commute to London on Tuesday morning returning on Friday evening.

My main residence (our family home) will be in Switzerland and from what I can gather from the UK Inland Revenue I will carry on paying UK income tax. Will the Swiss also start taxing me aswell? I just cant quite get the right answer from my searches.

Answers much appreciated or direction to another part of the site with the answer.

Many thanks
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  #2  
Old 08.03.2007, 21:07
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Re: Zurich London Commute

The amount of information you have provided is not sufficient to start giving you an answer, for example:
- are you self employed or not?
- who is paying your travel costs, the company or you?
- how many days will you actually spend in the UK a year?
- will you have accomodation available in the UK or stay in a hotel?
- is this likely to be a permanent or temporary before you work in CH?

I think you will get some sensible tips from others here, but your situation is not trivial and you would be well advised to get an hour or two of professional tax advice.

If you search the forum you will find a few names as starting point.

Daniel

Last edited by dannyt986; 08.03.2007 at 21:21.
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Old 09.03.2007, 14:21
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Re: Zurich London Commute

they don't include travelling days so for all intents and purposes you are in London 2 full days a week

I guess that puts you pretty close to the 91 day test (Google it and pay attention to doicument IR20)
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Old 09.03.2007, 14:30
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Re: Zurich London Commute

As Daniel pointed out you'll need some decent (i.e. paid for) advice on this. If you simply take the stated residency tests it's not rocket science to see that you'll end up resident in both countries at the same time. There are treaties, but my guess is that each country won't want to give up the revenue. If you don't want to pay for advice then I'd suggest googling for the text of the double taxation treaty between Switzerland and the UK and reading it yourself, as well as speaking directly with both tax authorities to ask for their position.
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Old 09.03.2007, 18:03
Shimla
 
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Re: Zurich London Commute [double taxation question]

All

Many thanks for your responses. I am employed and will remain so. I will be paying my own travel expenses and the situation will be permanent. The Double Tax Treaty only seems to deal with income form dividends and investments and not salary income which I believe will be taxed by the UK authorities and not recoverable through the Swiss system.

I will take professional advice but I just wanted to see if anyone else was in a similar position.

Thanks for your help.

Regards
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Old 10.03.2007, 21:11
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Re: Zurich London Commute [double taxation question]

I am married to a Swiss girl. I have lived in Switzerland for two and a half years but work in London four days a week Monday morning until Thursday evening. I suggest you send me an e-mail and we can get in touch I will tell you how it works for me.
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Old 10.03.2007, 21:25
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Re: Zurich London Commute [double taxation question]

Hi Branston, would you mind posting the basics here for the benefit of other members who may be in the same situation?
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Old 10.03.2007, 23:31
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Re: Zurich London Commute [double taxation question]

Hi
I would appreciate if you posted anything here too, as we will probably be in the same boat for a while, ie commuting to London from Geneva
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Old 11.03.2007, 00:22
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Re: Zurich London Commute [double taxation question]

The easiest solution could be not to register in Switzerland. If you're not registered and spending only weekends there, you are not residing in Switzerland for tax purposes. You would be paying tax only in the UK.
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Old 11.03.2007, 09:46
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Re: Zurich London Commute [double taxation question]

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The easiest solution could be not to register in Switzerland. If you're not registered and spending only weekends there, you are not residing in Switzerland for tax purposes. You would be paying tax only in the UK.
That would depend on the residency requirements in Switzerland. If you applied the above to the UK, you would be resident after a time (more than 90 days per year averaged over a four-year period). Other tests may applied such as having a significant centre of interest in the country. It would be clear that he would be living in Switzerland, whether he registered or not (which would also be illegal if he didn't). In any case, it would be to someone's advantage to pay their taxes in Switzerland rather than in the UK if at all possible.

I agree with the other posters - anyone on this thread who has or finds useful information on the topic should post it here - others who find this thread later will thank them.
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Old 11.03.2007, 19:09
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Re: Zurich London Commute [double taxation question]

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That would depend on the residency requirements in Switzerland. If you applied the above to the UK, you would be resident after a time (more than 90 days per year averaged over a four-year period). Other tests may applied such as having a significant centre of interest in the country. It would be clear that he would be living in Switzerland, whether he registered or not (which would also be illegal if he didn't). In any case, it would be to someone's advantage to pay their taxes in Switzerland rather than in the UK if at all possible.

I agree with the other posters - anyone on this thread who has or finds useful information on the topic should post it here - others who find this thread later will thank them.
Sorry, but this is wrong.

Swiss (and EU) Tax authorities apply tests as: center of interest, home ownership, nationality and so on, ONLY if you are not registered as a resident AND don't pay taxes anywhere else. So, show them your UK proof of residence, UK tax return and you're audit-proof in Switzerland.

As for the registration. It is not illegal not to register "as permanent resident", since three consecutive days is less than 90 days and three days times 52 weeks is less than six months in a year, so technically you're not breaking the commuter or temporary visitor rules.

Paying tax to the UK is the easier, more reasonable and logical option. But of course, not the only one.

If you want to take advantage of Switzerland's lower taxes, your employer has to declare you as non-resident, in addition to your own declaration. Then register in Switzerland. But your time spent in the UK is a problem, technically you're still "ordinarily resident" in the UK, even if "resident" in Switzerland. There is no legal way out of it.

You could argue you're non-domiciled but that's hard to prove it while being "ordinarily resident".

There are gray, fishy solutions, technically illegal (like your company telling IR you're telecommuting, while you're actually working out of their offices, and not reporting your trips to London, or, receiving your compensation through an offshore subsidiary, thus no UK income) but IR doesn't like any of them and you will be ***** if they decide to double check your returns and time spent in the UK, and believe me, they can easily do the latter.

Of course I'm not a lawyer nor a tax expert, just relaying acquantainces experiences.

I agree with Mark you should visit a tax expert, he or she might not be cheap, but peace of mind is priceless.

Last edited by Manolo; 11.03.2007 at 19:54.
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Old 11.03.2007, 19:37
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Re: Zurich London Commute [double taxation question]

As someone else suggested, not counting the days of departure and arrival gives 2 times 52 equal 104 less than 183 then you're not-resident. But it's greater than 91, that's ordinarily resident.

Complicated.

It's going to be hard not paying any tax to the UK while receiving UK income and actually working there.
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  #13  
Old 11.03.2007, 19:42
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Re: Zurich London Commute [double taxation question]

BTW Switzerland does not have that resident, ordinarily resident, or domiciled distinction.
If you are not a resident, spend less than six months there, and pay taxes to someone else they will leave you alone.
Plus, there is a double tax treaty UK-Switzerland. Under this treaty you could claim a deduction for UK taxes based on taxes paid in Switzerland but that's complicated and does not necessarily lowers your total tax liability.

The difficulty in this case is the strict UK rules for determining residence for tax purposes.
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Old 12.03.2007, 06:25
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Re: Zurich London Commute [double taxation question]

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BTW Switzerland does not have that resident, ordinarily resident, or domiciled distinction.
Oh but yes it does... At least it differentiates between resident and domiciled and does this through the location where your centre of life is. Granted this is generally for determining which canton you will pay tax in but it **can** also be applied to which country..

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If you are not a resident, spend less than six months there, and pay taxes to someone else they will leave you alone.
Which of course is perfectly correct they will not even trouble you if you do not pay tax at all unless you are resident, however this is not the case in this case as they will be Swiss resident and therefore liable for Swiss tax on global income irrespective of taxes paid elsewhere.
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The difficulty in this case is the strict UK rules for determining residence for tax purposes.
Actually the real difficulty is if you are paid out of the uk. There are no real problems with international assignments paid out of a foreign country as long as the person in the UK has no connection to the uk. As a declared non-uk resident you need to work a hell of a lot in order to qualify to pay uk tax... present 183 days in a year or 91 days averaged over 4 years
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Old 12.03.2007, 14:19
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Re: Zurich London Commute [double taxation question]

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There are no real problems with international assignments paid out of a foreign country as long as the person in the UK has no connection to the uk. As a declared non-uk resident you need to work a hell of a lot in order to qualify to pay uk tax... present 183 days in a year or 91 days averaged over 4 years
But this is exactly Shimla's case. It is NOT an international assignment. Read his posts, he will be working in London 2 full days a week= 104 days a year, greater than 91, therefore ordinarily resident.
I insist, this is the key difficulty. If he gets paid through another country, then IR will say: then why do you come to London so often? Instant audit.
Shimla will have a residence and a family in Switzerland, but having a residence is not the same thing as being resident for tax purposes.
Zurich canton has been known for bugging big banks executives registered in Zug or Schwyz but with "center of interests" in Zurich, but Shimla's situation is not the same and quite more favourable (to him).
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Old 12.03.2007, 17:00
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Re: Zurich London Commute [double taxation question]

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But this is exactly Shimla's case. It is NOT an international assignment. Read his posts, he will be working in London 2 full days a week= 104 days a year, greater than 91, therefore ordinarily resident.
I insist, this is the key difficulty. If he gets paid through another country, then IR will say: then why do you come to London so often? Instant audit.
Shimla will have a residence and a family in Switzerland, but having a residence is not the same thing as being resident for tax purposes.
Zurich canton has been known for bugging big banks executives registered in Zug or Schwyz but with "center of interests" in Zurich, but Shimla's situation is not the same and quite more favourable (to him).
IF he is paid in the uk for work performed in the uk and exceeds the 183 or 91 days limit he will be taxed - agreed. However, lets do some quick maths. Since when have we worked 52 weeks a year - standard is probably closer to 46 and that times 2 is 92 so he only needs to ensure he takes a couple of days extra holiday and all is done and dusted. And he will only be ordinarily resident IF he has an average of 91 days over 4 years as I think Mark said earlier.

And you can insist all you like but IR will NOT get involved in questioning why someone should come to London on a regular basis - it is so to speak legally none of their business. I know of several Big Bank executives who are in London several days a week and are paid out of Switzerland.

And furthermore pray tell me how the hell are the IR going to get to know if he is employed and paid in Switzerland. We have something called freedom of movement in Europe and he will only be registered as entering and leaving and not questioned as to the why of the visit...
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Old 12.03.2007, 22:35
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Re: Zurich London Commute [double taxation question]

Richard:

You're right, holidays might help to bring # of days below 91, if Shimla did not arrange to have his mondays off counted as vacation time.

There's still another potential problem. The IRS changed recently their rules to count every day of presence in the US, including days of arrival and departure. That burned a lot of canadians. IR could also change their rules at any time and that's something to have in mind.

IR will not usually audit every commuter who does not file a tax return, but they sure can. It has happened and it is perfectly legal. They recently sent a tax bill to a British citizen who claimed non-domiciled status and stayed in the UK for just 30 days in a year. They do monitor your stays in the UK. Yes, it's not their business but they're the government and they can do whatever they want. And it gets worse by the minute.

It's easy for a foreign executive not to be taxed in the UK thanks to the non-domiciled loophole. For a british citizen the only way to not owing a single penny to IR is acquiring non-domiciled status and that requires almost no visits to the UK.

IR will know if you're filing taxes in Switzerland if you're an UK national. They have a tax treaty remember? Tax treaties imply exchange of information. If you're british, every tax return you file in Switzerland will be sent to IR.
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  #18  
Old 15.03.2007, 18:12
Shimla
 
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Re: Zurich London Commute [double taxation question]

All

Im afraid I have been away and so not looking at the posts which I have just read, for which thank you.

From what I can gather because my work is in the UK and my services are performed wholly or mainly in the UK, I am subject to UK income tax. Domiciled, resident, non resident etc does not seem to affect this. Nor is this income tax recoverable under the double tax treaty (see below).

With regard to capital gains tax, tax on dividends and tax on investment income (i.e. other forms of tax that are not employment related income tax) these are subject to the residency and domicilation rules. They are also the subject of the UK/Swiss double taxation treaty (which deals with specific forms of taxation on dividends and investment income and is NOT concerned with income tax). This area is a minefield as you have all been discussing. I will make some more enquiries of the Revenue over the next few days and post my response. It would seem that several Brits are long distance commuters to Switzerland so the information will, I hope be useful.

Many thanks

Shimla
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Old 15.03.2007, 18:38
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Re: Zurich London Commute [double taxation question]

Yep, it's hard to take IR off your back if you're british.
Maybe your concern now, as we have established UK taxes are unavoidable, should be not paying anything to the Swiss? If I were you I would confirm with an accountant it is perfectly legal not to register or file for taxes in Switzerland in your situation, but again that's just my opinion. I'm not sure what will your wife's situation be if she's registered and you aren't but I think, I repeat, I'm not sure, allowances such as husband's support are non-taxable in Switzerland so she won't have to pay anything either?
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Old 15.03.2007, 21:53
Shimla
 
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Re: Zurich London Commute [double taxation question]

Manolo

Yes, I think you are right, the focus of my attention is now shifting to Swiss taxes.

I re-read IR20 which is quite clear that resident or not, if your employment is in the UK, for a UK company and paid in the UK then you are subject to income tax.

As I am a Commonwealth citizen (which includes British) I retain my personal allowances.

As I will be non-resident, not ordinarily resident and non-domiciled, I can receive bank interest without deduction of basic rate tax which is a minor consolation.

Shimla
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