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Subject Author Date
Anyone Expert With US/Swiss Tax Treaty? Tiziano 03-02-2008
Posted by Tiziano on March 2, 2008, 8:41 pm
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 I am planning on retiring in Switzerland. I am trying to understand
whether there is a taxation agreement between the USA and Switzerland
with regards to Social Security benefits and 401(k) withdrawals.

I am aware that the USA taxes her citizens no matter where they live; I
am also sure that Switzerland will want to tax me on my U.S. Social
Security benefits and 401(k) withdrawals. But there's got to be some
sort of agreement for the mitigation/avoidance of double taxation --I hope!

I located online the so-called "Convention Between the United States of
America And The Swiss Confederation For The Avoidance of Double Taxation
With Respect to Taxes on Income", but I honestly have troubles
understanding it. I am not even sure that it is the treaty that I
should be reading!

Anyone here an expert in this matter?

Thanks.
--
tb

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Posted by removeps-groups@yahoo.com on March 3, 2008, 12:07 pm
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> I am planning on retiring in Switzerland. I am trying to understand
> whether there is a taxation agreement between the USA and Switzerland
> with regards to Social Security benefits and 401(k) withdrawals.

FYI the treaty is at

http://www.irs.gov/businesses/international/article/0,,id=169682,00.html

But it's rather confusing to me and I don't understand it. All this
talk of contracting states and other states is very cryptic.


> I am aware that the USA taxes her citizens no matter where they live; I
> am also sure that Switzerland will want to tax me on my U.S. Social
> Security benefits and 401(k) withdrawals. But there's got to be some
> sort of agreement for the mitigation/avoidance of double taxation --I hope!
>
> I located online the so-called "Convention Between the United States of
> America And The Swiss Confederation For The Avoidance of Double Taxation
> With Respect to Taxes on Income", but I honestly have troubles
> understanding it. I am not even sure that it is the treaty that I
> should be reading!

The general rule is that you compute your tax in the US on form 1040,
subtract out the tax you paid to Switzerland as the foreign tax
credit, and the remainder (if any) is what you owe to the US. You
won't get money back if the tax paid to Switzerland is more (ie. the
credit is non-refundable), but you can carryforward or carrybackward
any excess. However, you get to exclude about 85k of earned income,
which basically means salary, on form 2555.

There might be special rules regarding social security, like it's
taxable only in Switzerland. The treaty should have all the answers.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Alan on March 3, 2008, 10:56 pm
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Tiziano wrote:
> I am planning on retiring in Switzerland. I am trying to understand
> whether there is a taxation agreement between the USA and Switzerland
> with regards to Social Security benefits and 401(k) withdrawals.
>
> I am aware that the USA taxes her citizens no matter where they live; I
> am also sure that Switzerland will want to tax me on my U.S. Social
> Security benefits and 401(k) withdrawals. But there's got to be some
> sort of agreement for the mitigation/avoidance of double taxation --I hope!
>
> I located online the so-called "Convention Between the United States of
> America And The Swiss Confederation For The Avoidance of Double Taxation
> With Respect to Taxes on Income", but I honestly have troubles
> understanding it. I am not even sure that it is the treaty that I
> should be reading!
>
> Anyone here an expert in this matter?
>
> Thanks.
Private pensions are subject to tax by the state in which you are
a resident. Private pensions are subject to the savings clause
in the tax treaty. Therefore, the US will tax your US pension as
you are a US citizen. If you become a resident of the Swiss
Confederation, they will also tax you. The US will allow you to
compute a foreign tax credit to avoid double taxation.

Social Security benefits from the US to a US citizen residing in
the Swiss Confederation are also subject to the savings clause
and will be taxed by the US if SSA benefits are subject to US tax
under US tax law. If you become a resident of the Swiss
Confederation, they will also tax your SSA benefits. The US will
allow you to compute a foreign tax credit to avoid double taxation.

A person is deemed resident in Switzerland if he has Swiss
employment (to work in Switzerland a non-national needs a work
permit - limited work permits of 90-120 days can be granted and
where granted lead to limited taxation); OR you carry on a
business in Switzerland; OR you live in Switzerland for not less
180 days in any one year. If you remain in the same abode the
time required to be a resident for tax purposes drops to 90 days.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by ben.a.bowen on March 5, 2008, 9:46 am
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> A person is deemed resident in Switzerland if he has Swiss
> employment (to work in Switzerland a non-national needs a work
> permit - limited work permits of 90-120 days can be granted and
> where granted lead to limited taxation); OR you carry on a
> business in Switzerland; OR you live in Switzerland for not less
> 180 days in any one year. If you remain in the same abode the
> time required to be a resident for tax purposes drops to 90 days.

I hate to derail this topic but I just posted another post regarding
this and am waiting to the mod to approve. I moved to Switzerland from
Texas on July 1. I have taken a permanent position in Zürich and do
not plan on moving back to the US any time soon. I do not plan on
giving up my citizenship. As far a I know, I do not count as a bona
fide foreign resident yet as I have not been here a full year. I paid
US taxes through June. I have been paying Swiss taxes since July 1. Am
I able to deduct the Swiss taxes from my US taxes? Or will I be doubly
taxed on those 6 months? Everything I've read speaks of "bona fide"
and "presence", but I can't seem to find an answer to this. I've
lived in the same place since August, so does that mean I can deduct
my Swiss taxes from my US taxes?

Thanks a million. My other other post will be popping up soon. Again,
don't mean to derail, but I couldn't help myself.

Ben..

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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