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  #21  
Old 03.04.2011, 11:44
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Re: US citizen working in the CH- Taxes in CH and US and pension contributions in CH

There are many threads on US Taxes. You can do a search on the EF site.

I don't mean this as a put down to anyone, but I think that you
are best off with a CPA, if you do not understand the rules.

There are several threads with names of CPA's in the area. PM
me if you cannot find one.
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Old 04.04.2011, 18:38
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Re: US citizen working in the CH- Taxes in CH and US and pension contributions in CH

be very careful with that... I would highly doubt that you can move money from the 3rd pillar into a US based Roth very easily (if at all). You would have better luck simply buying dollars at a (currently) very low price and then max out your Roth contribution in the States.

When you are making more money you can also contribute to a regular IRA to reduce your tax liability in the US. If you are a US citizen or green card holder you must also file a return. Although you may have no tax liability you still need to file a return.

There is nothing wrong with holding foreign accounts, but those accounts must produce a tax document and it must be declared to the US. Failure to do so may result in a tax evasion charge.

Investing in the US while overseas can be a tricky matter and is dependent on if you ever plan on returning to the US, if you never plan on returning then you don't need to worry about anything.

I can tell you first hand that I regularly invest in the US with a brokerage account, two Roths and two IRA's (married) and never contribute to the 3rd level (as contributions have no affect on US tax liability).
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  #23  
Old 06.04.2011, 17:41
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Re: US citizen working in the CH- Taxes in CH and US and pension contributions in CH

Based on my own knowledge and online reserach when I moved here, the following seems to make sense for Swiss pension contribution for an American:

It depends on whehter you have US tax liability or not after taking the foreign income exclusion and th foreign tax credit (yes, you can take both, but if you've taken the income exlcusion first, the foreign tax credit is reduced proportionally).

Example 1: You contribute x% to pillar 2 and 0% to pillar 3. At the tax filing day, your US tax liabiliy > 0. In this case, you should try to reduce your contribution to pillar 2 (I know this may not always be possible as it depends on your employer's rules about pillar 2). But, generally speaking, the goal is for you to reduce your contribution to pillar 2 until you have no US tax liability. Of course, this may not always be possible, as the smallest x can be is 0. How does this work? Well, when you reduce your contribution to pillar 2, you will increase your tax in CH, which will give you more foreign tax credit which will then reduce your remaining tax liability to the US. (ps. It's not one to one though, this is just a simplified example!)

Example 2: You contribute x% to pillar 2 and 0% to pillar 3. At the tax filing day, your US tax liability is 0. In this case, you should try to reduce your CH tax liability (by contributing to pillar 3, as an example). However, keep in mind that reducing CH tax liability might increase US tax liablity.

The rationales... well, the main thing is that you don't want to be double taxed on the same $1 you earn. What am I talking about? Well, imagine the following scenario: let's say that you contribute CHF 1000.- into your pillar 3 account in CH. By doing so, these 1,000.- are not taxed in CH (pre-tax money). At tax filing day, you find out that you actually have US tax liablity to pay. You are effectively double taxed in this case now... BAD! Why? well, you contribution to pillar 3 is NOT tax deductible in your US tax return. Hence, that 1,000 is taxed now by the US. Then, when you leave CH or when you retire, since the 1,000 was pre-tax money, the CH government will now ask you to pay tax on the 1,000 when you withdraw the money. See how you've now just made yourself pay tax twice on the same money? This is why you would hear advice like "don't contribute to pillar 3" for Americans.

The long story short... You should probably only contribute to pillar 2 and pillar 3 if you don't have US tax liability remaining to be paid at the end of the day. If you owe tax to the US after doing your tax return, then in most cases whatever you put into pillar 2 or 3 will be double taxed - first now by the US, and then by the Swiss when you gain access to the money.
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  #24  
Old 07.04.2011, 01:06
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Thanks for these insights. The idea of double taxation really makes sense.
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