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Old 12.09.2009, 02:41
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Tax / salary question

Hello All,

This is my first post on this forum. Sorry if this has already been covered somewhere, but it seems to be a somewhat complex issue, well, at least for me and I have not been able to find anything here that would answer my question.

I'm from the US and a US consulting company is planning to move me to Switzerland to work on their behalf with a Swiss client in Basel for at least a year. They are planning to pay my salary in USD into an American bank account, and take out US taxes from my paycheck. This is where it gets complicated - can this even be done this way? Don't I have to file for and pay taxes in Switzerland? If I don't have to pay taxes in Switzerland on this income, how will I even prove that I'm working in Switzerland, how would I renew my work permit be it an L or a B permit?

I have a feeling that they would need to pay out my salary into a Swiss bank account in Switzerland and I would have to pay Swiss taxes (which will then be subtracted from the taxes I owe in the US).

Has anyone ever been in such a situation and knows what really needs to be done here?

Thank you very much for any input anyone may have.
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Old 12.09.2009, 09:14
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Re: Tax / salary question

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Hello All,

This is my first post on this forum. Sorry if this has already been covered somewhere, but it seems to be a somewhat complex issue, well, at least for me and I have not been able to find anything here that would answer my question.

I'm from the US and a US consulting company is planning to move me to Switzerland to work on their behalf with a Swiss client in Basel for at least a year. They are planning to pay my salary in USD into an American bank account, and take out US taxes from my paycheck. This is where it gets complicated - can this even be done this way? Don't I have to file for and pay taxes in Switzerland? If I don't have to pay taxes in Switzerland on this income, how will I even prove that I'm working in Switzerland, how would I renew my work permit be it an L or a B permit?

I have a feeling that they would need to pay out my salary into a Swiss bank account in Switzerland and I would have to pay Swiss taxes (which will then be subtracted from the taxes I owe in the US).

Has anyone ever been in such a situation and knows what really needs to be done here?

Thank you very much for any input anyone may have.
Does the US company have a presence in Switzerland?

If not, then the client must arrange your visa and work permit - are they willing to do this?

The Swiss will not care where you have you salary paid but if you are resident in Switzerland then you pay tax here on your worldwide income. The client, the uS company, or you must make arrangements to pay the social security (AHV) payments.

A further complication is that, presumably, the client will pay the US company and they will pay you. This may be viewed as disguised employment in which case the client or maybe the US company would have to deposit a refundable bond of CHF 50K with the authorities against the possibility of unpaid AHV and taxes.

Finally, having known someone is a very similar position recently I would guess that the work permit would be refused on the basis of lack of contract between you and the client.
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Old 12.09.2009, 19:05
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Re: Tax / salary question

You will be taxable in Switzerland not only on your worldwide income. You must also declare worldwide assets and pay wealth tax in Switzerland.
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Old 13.09.2009, 19:52
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Re: Tax / salary question

Thank you for the reply.

The US company does have a Swiss presence - so, that should make things easier.

From your reply it sounds like the easiest thing to do would be to simply have them pay my salary in Swiss francs in Switzerland and then simply file a tax return in the US at the end of the year and have the Swiss taxes apply to the US tax return - I should not be charged a federal income tax - so, I will not be double taxed.

I will explain this to the US company to make things easier and make sure that I don't have any issues getting a work permit.

Thanks.

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Does the US company have a presence in Switzerland?

If not, then the client must arrange your visa and work permit - are they willing to do this?

The Swiss will not care where you have you salary paid but if you are resident in Switzerland then you pay tax here on your worldwide income. The client, the uS company, or you must make arrangements to pay the social security (AHV) payments.

A further complication is that, presumably, the client will pay the US company and they will pay you. This may be viewed as disguised employment in which case the client or maybe the US company would have to deposit a refundable bond of CHF 50K with the authorities against the possibility of unpaid AHV and taxes.

Finally, having known someone is a very similar position recently I would guess that the work permit would be refused on the basis of lack of contract between you and the client.
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Old 13.09.2009, 19:54
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Re: Tax / salary question

I have no assets, nothing to tax. I just don't want to be double taxed - in the states and in Switzerland, thus, I must be paid a salary in Switzerland and not in US - or if I am paid in the US, no taxes should be taken out there, so that I can pay my taxes in Switzerland.

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You will be taxable in Switzerland not only on your worldwide income. You must also declare worldwide assets and pay wealth tax in Switzerland.
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Old 13.09.2009, 20:01
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Re: Tax / salary question

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I have no assets, nothing to tax. I just don't want to be double taxed - in the states and in Switzerland, thus, I must be paid a salary in Switzerland and not in US - or if I am paid in the US, no taxes should be taken out there, so that I can pay my taxes in Switzerland.
Your conclusion is correct. Unlikely that you can be paid in the US and yet exempted from US taxes. Hence, better take a Swiss salary and pay Swiss taxes. You may nevertheless have a residual US liability.
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Old 13.09.2009, 20:03
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Re: Tax / salary question

Yeah, that's definitely possible, but that liability would be on Social Security tax, not on federal income, am I correct?

Thanks for replying.

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Your conclusion is correct. Unlikely that you can be paid in the US and yet exempted from US taxes. Hence, better take a Swiss salary and pay Swiss taxes. You may nevertheless have a residual US liability.
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Old 13.09.2009, 20:06
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Re: Tax / salary question

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I have no assets, nothing to tax. I just don't want to be double taxed - in the states and in Switzerland, thus, I must be paid a salary in Switzerland and not in US - or if I am paid in the US, no taxes should be taken out there, so that I can pay my taxes in Switzerland.
If you work here more than six months, you will have to pay
taxes here.

If you are being paid in the US, your company will take withholding
just like you probably have now. You would still be liable for Swiss
taxes.


Here is a quote of mine from another thread:

You have to file a return if you are a US citizen.

As a person living outside the US, you can either take

1. Foreign tax credit for taxes paid in Switzerland.
2. Exclude 87000 of foreign income from your US return.

I did option 2 because I live in Canton Zug, and taxes are lower there.
The option to pick depends on your tax situation.
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Old 13.09.2009, 20:19
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Re: Tax / salary question

Interesting...

When I lived in Germany, Social Security withholding was the only thing that came into play - income tax did not, is this the case with Switzerland?

To me it sounds like I will be liable for the entire Federal tax amount - and I will have to choose one of the options - depending on how much tax I will pay in Switzerland.

I will be living in Basel, I wonder what the taxes are like there.


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If you work here more than six months, you will have to pay
taxes here.

If you are being paid in the US, your company will take withholding
just like you probably have now. You would still be liable for Swiss
taxes.


Here is a quote of mine from another thread:

You have to file a return if you are a US citizen.

As a person living outside the US, you can either take

1. Foreign tax credit for taxes paid in Switzerland.
2. Exclude 87000 of foreign income from your US return.

I did option 2 because I live in Canton Zug, and taxes are lower there.
The option to pick depends on your tax situation.
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Old 14.09.2009, 15:08
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Re: Tax / salary question

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Hello All,

This is my first post on this forum. Sorry if this has already been covered somewhere, but it seems to be a somewhat complex issue, well, at least for me and I have not been able to find anything here that would answer my question.

I'm from the US and a US consulting company is planning to move me to Switzerland to work on their behalf with a Swiss client in Basel for at least a year. They are planning to pay my salary in USD into an American bank account, and take out US taxes from my paycheck. This is where it gets complicated - can this even be done this way? Don't I have to file for and pay taxes in Switzerland? If I don't have to pay taxes in Switzerland on this income, how will I even prove that I'm working in Switzerland, how would I renew my work permit be it an L or a B permit?

I have a feeling that they would need to pay out my salary into a Swiss bank account in Switzerland and I would have to pay Swiss taxes (which will then be subtracted from the taxes I owe in the US).

Has anyone ever been in such a situation and knows what really needs to be done here?

Thank you very much for any input anyone may have.
I understand this is a secondment. Your salary is paid by a US company that has no PE or branch or subsidiary or anything in CH, right? Then it is right that you have to pay your taxes in Switzerland, but as your salary is paid by a foreign entity, no tax at source can be levied. Therefore you will have to submit a tax return each year, declaring your income. It then depends what kind of agreement your employer concluded with the Swiss tax authority. Usually seconded employee can file only a simplified tax return, declaring only their Swiss income, taxed at their Swiss income rate. No wealth tax. Your Swiss taxes will then be credited against your US taxes. It is highly probable that your Swiss taxes will be lower than your US taxes, but you should negotiate with your employer that he pays the Swiss taxes that could be due in addition (if any) to your US taxes.

If your employer has not submitted any request to the tax authority, then you should ask him to revert to a tax advisor and look for that kind of agreement, which would much simplify your tax obligations.
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Old 14.09.2009, 18:02
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Re: Tax / salary question

This US company does have presence in Switzerland. I think they just opened a legal entity there - not too sure whether it's physical or not.

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I understand this is a secondment. Your salary is paid by a US company that has no PE or branch or subsidiary or anything in CH, right? Then it is right that you have to pay your taxes in Switzerland, but as your salary is paid by a foreign entity, no tax at source can be levied. Therefore you will have to submit a tax return each year, declaring your income. It then depends what kind of agreement your employer concluded with the Swiss tax authority. Usually seconded employee can file only a simplified tax return, declaring only their Swiss income, taxed at their Swiss income rate. No wealth tax. Your Swiss taxes will then be credited against your US taxes. It is highly probable that your Swiss taxes will be lower than your US taxes, but you should negotiate with your employer that he pays the Swiss taxes that could be due in addition (if any) to your US taxes.

If your employer has not submitted any request to the tax authority, then you should ask him to revert to a tax advisor and look for that kind of agreement, which would much simplify your tax obligations.
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Old 30.09.2009, 03:33
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Re: Tax / salary question

Ok, so, I found out a bit more about my situation:
The US company does have legal entity presence in Switzerland - a branch, but it's not incorporated - which allows them to get work permits for their employees in Switzerland, but not to process payroll.

What I can't fully clarify is when the Swiss government does a tax assessment on me at the end of the year, will they take into account the fact that I am paying taxes in the US on my income, while I'm servicing a Swiss client of my US company in Switzerland, or will they simply force me to pay them what they think I owe.

My company tells me that their Swiss attorneys say that this is not an issue, and that I will not be liable for taxes to the Swiss government.

Anyway, does anyone know a good accountant in Switzerland who will clarify this for me? Because if you want anything done right, you have to do it yourself - I want someone with first hand knowledge to let me know that I will not be liable to Switzerland for taxes - otherwise, I'm going to claim a maximum amount of exemptions on my US W2 forms just so that I have the money to pay Swiss tax authorities when the time comes.

Thanks for all your help.

Cheers.

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I understand this is a secondment. Your salary is paid by a US company that has no PE or branch or subsidiary or anything in CH, right? Then it is right that you have to pay your taxes in Switzerland, but as your salary is paid by a foreign entity, no tax at source can be levied. Therefore you will have to submit a tax return each year, declaring your income. It then depends what kind of agreement your employer concluded with the Swiss tax authority. Usually seconded employee can file only a simplified tax return, declaring only their Swiss income, taxed at their Swiss income rate. No wealth tax. Your Swiss taxes will then be credited against your US taxes. It is highly probable that your Swiss taxes will be lower than your US taxes, but you should negotiate with your employer that he pays the Swiss taxes that could be due in addition (if any) to your US taxes.

If your employer has not submitted any request to the tax authority, then you should ask him to revert to a tax advisor and look for that kind of agreement, which would much simplify your tax obligations.
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Old 30.09.2009, 16:17
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Re: Tax / salary question

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Ok, so, I found out a bit more about my situation:
The US company does have legal entity presence in Switzerland - a branch, but it's not incorporated - which allows them to get work permits for their employees in Switzerland, but not to process payroll.

What I can't fully clarify is when the Swiss government does a tax assessment on me at the end of the year, will they take into account the fact that I am paying taxes in the US on my income, while I'm servicing a Swiss client of my US company in Switzerland, or will they simply force me to pay them what they think I owe.

My company tells me that their Swiss attorneys say that this is not an issue, and that I will not be liable for taxes to the Swiss government.

Anyway, does anyone know a good accountant in Switzerland who will clarify this for me? Because if you want anything done right, you have to do it yourself - I want someone with first hand knowledge to let me know that I will not be liable to Switzerland for taxes - otherwise, I'm going to claim a maximum amount of exemptions on my US W2 forms just so that I have the money to pay Swiss tax authorities when the time comes.

Thanks for all your help.

Cheers.
All residents in Switzerland must pay Swiss social security contributions and Swiss taxes on global income and global wealth. The only exceptions are for diplomats and certain UN employees.

Subsequently, when you file in the US, you can claim credits and certain exemptions for taxes already paid in Switzerland.
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Old 30.09.2009, 16:33
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Re: Tax / salary question

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Ok, so, I found out a bit more about my situation:
The US company does have legal entity presence in Switzerland - a branch, but it's not incorporated - which allows them to get work permits for their employees in Switzerland, but not to process payroll.

What I can't fully clarify is when the Swiss government does a tax assessment on me at the end of the year, will they take into account the fact that I am paying taxes in the US on my income, while I'm servicing a Swiss client of my US company in Switzerland, or will they simply force me to pay them what they think I owe.

My company tells me that their Swiss attorneys say that this is not an issue, and that I will not be liable for taxes to the Swiss government.

Anyway, does anyone know a good accountant in Switzerland who will clarify this for me? Because if you want anything done right, you have to do it yourself - I want someone with first hand knowledge to let me know that I will not be liable to Switzerland for taxes - otherwise, I'm going to claim a maximum amount of exemptions on my US W2 forms just so that I have the money to pay Swiss tax authorities when the time comes.

Thanks for all your help.

Cheers.

As mentioned once before, you will be liable for taxes in Switzerland
if you work for over 6 months. You will have to file a tax return for
your Swiss income.

If your company is taking withholding in the US, you will file
a return at the end of the year and get a large portion of those
taxes back. It is important that you get a Swiss work permit
in order to do this.

If you see my original post a few back, these are your options
for your American return.
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Old 30.09.2009, 17:02
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Re: Tax / salary question

Thank you all for your help.
It looks like I will have to raise my exemptions in the US and pay less taxes there throughout the year in order to be able to pay taxes in Switzerland.

I did read on the US Social Security site that there is a form you can produce for the Swiss government to be exempt from their social security taxes: http://www.ssa.gov/international/Agr.../switzrld.html - section 3 covers this.
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Old 30.09.2009, 17:30
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Re: Tax / salary question

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Hello All,

This is my first post on this forum. Sorry if this has already been covered somewhere, but it seems to be a somewhat complex issue, well, at least for me and I have not been able to find anything here that would answer my question.

I'm from the US and a US consulting company is planning to move me to Switzerland to work on their behalf with a Swiss client in Basel for at least a year. They are planning to pay my salary in USD into an American bank account, and take out US taxes from my paycheck. This is where it gets complicated - can this even be done this way? Don't I have to file for and pay taxes in Switzerland? If I don't have to pay taxes in Switzerland on this income, how will I even prove that I'm working in Switzerland, how would I renew my work permit be it an L or a B permit?

I have a feeling that they would need to pay out my salary into a Swiss bank account in Switzerland and I would have to pay Swiss taxes (which will then be subtracted from the taxes I owe in the US).

Has anyone ever been in such a situation and knows what really needs to be done here?

Thank you very much for any input anyone may have.
Hi and welcome to Switzerland,

I was in a similar situation when I worked for a consulting company in an EU country on projects in Switzerland. They also had a local branch, and I had an L-permit (that was before there were any treaties between CH and EU - so same as your situation today).

I continued to receive my salary just as before paid by my employer outside of CH. At some point, the Swiss authorities demanded that my company in CH pay "Quellensteuer" (source tax for foreign employees) for me, but in the end I managed to convince them that I paid my taxes outside CH anyways and that I was here only temporarily (I did not have an apartment rented under my name and left every weekend), so eventually they didn't ask for it anymore.

In general, Swiss authorities take a fairly pragmatic approach compared to most countries I know - there's no black and white but you can always argue with them. Anyways, if you should be taxed, I would ensure that your employer takes care of everything (they should pay the taxes for you and also take care of all the formalities). In the end, it should not make a difference for you personally.

I later used to work for a large management consulting firm with offices around the world - we often had consultants form other countries working in CH, but I don't think anyone ever paid taxes here.
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Old 30.09.2009, 17:33
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Re: Tax / salary question

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Anyway, does anyone know a good accountant in Switzerland who will clarify this for me?
I think PriceWaterhouseCoopers in Zurich is pretty good in these things. You'll find them easily on google.
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Old 30.09.2009, 17:54
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Re: Tax / salary question

Thank you for the reply.

I will be in Switzerland on a more permanent basis and will most likely have an apartment rented under my name. So, I will not be able to make the same argument as you. But I will make sure that my company will take care of everything.



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Hi and welcome to Switzerland,

I was in a similar situation when I worked for a consulting company in an EU country on projects in Switzerland. They also had a local branch, and I had an L-permit (that was before there were any treaties between CH and EU - so same as your situation today).

I continued to receive my salary just as before paid by my employer outside of CH. At some point, the Swiss authorities demanded that my company in CH pay "Quellensteuer" (source tax for foreign employees) for me, but in the end I managed to convince them that I paid my taxes outside CH anyways and that I was here only temporarily (I did not have an apartment rented under my name and left every weekend), so eventually they didn't ask for it anymore.

In general, Swiss authorities take a fairly pragmatic approach compared to most countries I know - there's no black and white but you can always argue with them. Anyways, if you should be taxed, I would ensure that your employer takes care of everything (they should pay the taxes for you and also take care of all the formalities). In the end, it should not make a difference for you personally.

I later used to work for a large management consulting firm with offices around the world - we often had consultants form other countries working in CH, but I don't think anyone ever paid taxes here.
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