- Swiss Tax Glossary
- Allocations familiales / Familienzulagen
- Assurances sociales / Sozialversicherungen
- Certificat de Salaire / Lohnausweis
- Choix du nom de famille / Namenswahl bei Heirat
- Imposition des successions / Besteuerung von Erbschaften
- Le 2e Pilier / Die 2. Säule
- Le 3e Pilier / Die 3. Säule
- Le Revenu Gagné / Erwerbseinkünfte
- L’impôt foncier / Liegenschaftssteuer
- Impôt sur les gains immobiliers / Grundstückgewinnsteuer
- L’impôt sur la fortune immobilière / Vermögenssteuer auf Liegenschaften
- L’Impôt sur le revenu / Einkommenssteuer zur Verfügung
- Pension alimentaire / Unterhalt Aufcommen
- Church Tax
- Swiss Pension Accounts
- Social Security in Switzerland (Old-age, Survivors' and Invalidity Benefits)
- Swiss - US Social Security Totalization Agreement
- Taxation of Social Security Benefits
- Contributions to Employer Pension Schemes
- Taxation of Pension Benefits
- Extension of Treaty Benefits through the Non-Discrimination Clause
- Tie-Breaker Rule to Apply Treaty Benefits
- Is my Swiss Pension going to be double taxed?
- Swiss Income Reporting
- How do I report income on the tax questionnaire?
- How do I report taxes paid on the tax questionnaire?
- How do I report my deductions?
- How do I report pension contributions?
- How do I report pension payouts?
- My taxes are taken out of my salary automatically but then I also have a deduction taken out for contributions to AVS (Basic Pension Insurance). Do I add these together for my income tax?
- Swiss Financial Accounts
- Swiss-US FATCA Treaty Overview
- FATCA model type chosen by Swiss Parliament
- What searches do a Swiss bank have to do to comply with US FATCA?
- Which types of Swiss financial accounts must the US individual report on FBAR / FATCA?
- Which types of Swiss financial assets are not required to be reported on FBAR / FATCA?
Swiss Tax Glossary
Allocations familiales / Familienzulagen
Family allowances -- various federal and cantonal allowances for children, education, birth, and adoption. Not included in US taxable income.
Assurances sociales / Sozialversicherungen
Social Insurance: The basic pension insurance, Taxable income in Switzerland and in the United States, subject to the foreign tax credit to eliminate double taxation. Report it in Income > Passive Income > Pension section of our Tax Questionnaire.
Сertificat de Salaire / Lohnausweis
The salary statement used throughout Switzerland to provide information about income and expenses received. Main document required for preparation of US tax return for expats employed in Switzerland.
Choix du nom de famille / Namenswahl bei Heirat
Choosing your name after marriage: Regardless of the family name used on Swiss documents, you must provide your family name in the Main section of our Tax Questionnaire as shown on your U.S. Social Security card until you officially change your name with the US Social Security Administration.
Imposition des successions / Besteuerung von Erbschaften
Taxation on Inheritance: May be imposed by cantons on the person who inherits the estate. No U.S. federal taxation on the U.S. or foreign inheritance. U.S. inheritance in some cases may be taxed at the state level. Report inheritance in the Income > Corporation & Trust > Trust section of our Tax Questionnaire.
Le 2e Pilier / Die 2. Säule
Pillar 2 - Occupational Pension Provision. Employer contributions to Pillar 2 included in the calculation of US annual taxable income of the employee. Report in Income > Wages> Income Outside of the U.S. section of our Tax Questionnaire.
Le 3e Pilier / Die 3. Säule
Pillar 3 - Individual Pension Provisions. Contributions to Pillar 3 are not deductible from the U.S. annual income but distributions are treated on U.S. tax return as the payout from the regular investment made with the previously taxed money (only growth is taxable). Report balance of pillar 3 in the Non-US Financial Accounts section - reportable on FBAR/8938. Contributions not reportable annually - only balance.
Le Revenu Gagné / Erwerbseinkünfte
Income earned from gainful employment.
L’impôt foncier / Liegenschaftssteuer
Property tax, sometimes known as land or real estate tax, is a cantonal or communal tax on land and buildings. It is calculated on the full taxable value of the property, i.e., without taking account of any related debts or mortgages. Report in Taxes & Deductions > Deductions section of our Tax Questionnaire or in the Income > Passive Income > Rental Income section of the Tax Questionnaire if the property was rented out.
Impôt sur les gains immobiliers / Grundstückgewinnsteuer
Tax on gains from the selling of property. In Switzerland, a profit made on the sale of the property is either subject to a special tax (property gains tax) or should be declared as ordinary income. In the U.S,. tax on gains from the sale of the property may be treated as long-term or short-term gains and in certain cases may be tax-exempt. Report in the Passive Income > Home Sale section, question Foreign tax paid on capital gains from property sale.
L’impôt sur la fortune immobilière / Vermögenssteuer auf Liegenschaften
The wealth tax on the value of real estate property -- not allowed as a Foreign Tax Credit (FTC) but can be deducted as a part of itemized deductions on U.S. tax returns. Report it Taxes & Deductions > Deductions section of our Tax Questionnaire.
L’Impôt sur le revenu / Einkommenssteuer zur Verfügung
Income Tax: Amount of foreign income tax (federal and cantonal) can be utilized as a Foreign Tax Credit to offset US tax liability. Report tax imposed on the particular income type on Taxes & Deductions > Taxes Paid section.
Pension alimentaire / Unterhalt Aufcommen
Spousal support, Alimony: Deductible from taxable income by the spouse paying alimony. Report it on Income > Other Income section of our Tax Questionnaire.
Church tax is not a cantonal tax (although levied by cantons); it is explicitly excluded from Foreign Tax Credit (FTC) Qualification. Reason: you have to register your religion as Catholic to be subject to this levy. In other words, this is voluntary. You cannot deduct at FTC contributions made to any religious organizations.
Swiss Pension Accounts
Social Security in Switzerland (Old-age, Survivors' and Invalidity Benefits)
Contributions to Swiss Social Insurance system withheld from your paycheck or made on self-employment income are not deductible from the U.S. taxable income and do not qualify for the foreign earned income credit.
Swiss - US Social Security Totalization Agreement
A bilateral agreement between the United States and Switzerland improves Social Security protection for people who work or have worked in both countries. It helps people who, without the agreement, would not be eligible for retirement, disability or survivors benefits under the Social Security system of one or both countries. It also helps many people who would otherwise have to pay Social Security taxes to both countries on the same earnings.
The provisions of the agreement eliminate double Social Security taxation and permit dual residents to use their work in both countries to qualify for benefits.
If you are self-employed
Contributions to Social Insurance system make you exempt from contributions to the US Social Security system that otherwise would be required in the US on self-employment income.
How it impacts those who want to earn US Social Security credits
If you have Social Security credits in both the United States and Switzerland, you may be eligible for benefits from one or both countries. If you meet all the basic requirements under one country's system, you will get a regular benefit from that country. If you do not have enough work credits under the U.S. system to qualify for regular benefits, you may be able to qualify for a partial benefit from the United States based on both U.S. and Swiss credits. To be eligible to have your Swiss credits counted, you must have earned at least six credits under the US system.
Although the agreement allows the Social Security Administration to qualify for US retirement, disability or survivor benefits, the agreement doesn’t cover Medicare benefits.
Taxation of Social Security Benefits
US Social Security Benefits paid to Swiss residents
The United States, as the source country, subjects up to 85 percent of the benefits paid to US citizens residing in Switzerland for taxation. Switzerland, as the residence country, also subjects the US benefits received by those individuals to taxation. Foreign tax credit relief can be applied only on the US side
Swiss Social Security Benefits paid to US residents
No special double taxation relief rule is required in the reverse situation where Swiss social security benefits are paid to US residents because Switzerland does not tax the benefits when it is the source country.
Contributions to Employer Pension Schemes
When a US citizen/green card holder is a participant in the Pillar 2 pension plan:
Contributions paid by or on behalf of that individual to the pension scheme may not be excluded in computing his US taxable income. Employer contributions are added to gross annual wages for calculation of taxable earned income.
Taxation of Pension Benefits
Pensions and other similar remunerations paid to US citizen/green card holder residing in Switzerland are taxable in both countries.
However, you can eliminate the burden of double taxation. Taxes paid in Switzerland on pension income are applied as a foreign tax credit against tax owed on the same income in the US.
Extension of Treaty Benefits through the Non-Discrimination Clause
Article 24 of the US/Swiss Tax Treaty requires the United States to grant national treatment to residents and citizens of Switzerland even if that person is a citizen of the United States. Specifically, application of Non-Discrimination Clause allows deferral of income earned in pension funds through the time when benefits are paid, although in absence of non-discrimination clause, income in pension funds earned by US tax residents must be included in US annual taxable income.
Tie-Breaker Rule to Apply Treaty Benefits
US green card holders residing in Switzerland may elect to apply what is known as the tie-breaker rule of the US/Swiss Tax Treaty and be deemed a resident only of the State (i.e., country) with which their personal and economic relations are closer (Switzerland).
Under such an election, the individual would file form 1040NR and report only income derived from US sources. The requirement to provide full disclosure of foreign bank accounts remains and tax on income from US sources will be higher than the tax on the same income when applied to US residents filing form 1040.
Moreover, the person would be treated as a US resident for US tax purposes other than determining the individual's US tax liability. For example, in determining whether a foreign corporation is a controlled foreign corporation, shares in that corporation held by the individual would be considered to be held by a US resident and form 5471 information return with respect to certain foreign corporations will be required.
Is my Swiss Pension going to be double taxed?
When you start receiving pension distributions your monthly benefit will have the taxable and non-taxable portion. The main nontaxable portion is all of your own contributions that have not been deducted from taxable income in the US In addition, employer contributions that have been reported on your US tax return will be a part of the nontaxable part. All this taken together will constitute the "cost" in pension.
The taxable portion will be calculated using the IRS calculator that factors in your cost in pension and your age at the time when you receive the benefits. This is not a simple calculation but after it's done once it will be easy to continue in the following years.
Tax treaties with some countries have a far simpler way of calculating the taxable portion: i.e. 25% of the UK is non-taxable in the US
Swiss Income Reporting
How do I report income on the tax questionnaire?
For income you earned while being employed
Report your gross salary shown on line 8 of the Certificat de Salaire. Separately report the number of employer contributions to Pillar 2. Generally, the amount of your employer contributions to Pillar 2 is equal to your own Regular Contributions shown on line 10.1 of the Certificat de Salaire.
If you had more than one employer over the year, add amounts from both Certificats.
For income earned from self-employment
Income from self-employment is a turnover of your unincorporated business. Report it on Gross Income from Self-employment question of the Income > Self-employment tab.
Each type of income is reported as the gross amount, before any deductions allowed in Switzerland (i.e. before contributions to Pillar 1).
If you received redundancy pay, add gross amount as additional wages. Report other types of income (i.e. workplace pension, State pension, dividends, alimony, royalties, unemployment) on the respective lines of Pension or Other Income tabs of the tax questionnaire.
How do I report taxes paid on the tax questionnaire?
Similarly to income, the tax also has to be reported separately for each type of income on which tax was paid. The base amount of income tax withheld from wages is shown on line 12 of the Certificat de Salaire.
If there was additional tax payment during the calendar year (i.e. the paid tax bill for federal or cantonal taxes on income earned this or previous year) - add that amount to tax withheld from wages.
Taxes on unearned income may be withheld by the payor (i.e. bank withheld income tax from dividends) or you may owe tax upon completion of tax assessment form. Report each type of tax paid during the filing year in the respective section, even if it applied to income received in prior years.
Wealth tax is not a part of income tax. It can be deducted on your US tax return as a part of itemized deductions. Report this tax on Taxes & Deductions > Deductions tab of our Tax Questionnaire.
How do I report my deductions?
We will take specific deductions allowed for Swiss residents by the US/Swiss Tax Treaty (i.e Swiss Resident who remain in the United States long enough to become tax residents under U.S. internal law, but do not acquire permanent residence status (i.e., they do not become "green card" holders), will qualify for various tax exemption benefits if they conflict with the Internal Revenue Code rules.
Further, Taxes & Deductions > Deductions section of TQ offers you questions related to various deductions Examples of such deductions are mortgage interest, alimony payments, investment advisor fees. Similarly to personal allowance in the UK, the U.S. tax system also applies a concept of “Standard deduction”: $12,000 per single person and $24,000 for the married couple for 2018 tax year. For most Swiss residents filing U.S. tax return standard deduction option is more tax efficient than “itemized deductions” - grossing up individual deductions.
How do I report pension contributions?
Report employer contributions to Pillar 2 on the Income > Wages > Income Outside of the U.S. tab. Contributions to Pillar 1 and Pillar 3 do not need to be reported.
How do I report pension payouts?
Report payouts from the foreign pension of all types: Social Security, Occupational Pension on the Income > passive Income > Pension tab.
If you have not received your AHV tax certificate please request one at your cantonal Compensation office.
Report distributions from Pillar 3 accounts as income from regular investment. From the IRS perspective, contributions to Pillar 3 were made from after-tax funds. Therefore only growth in the account is subject to tax. Report interest and dividends as if you have received it from the bank account or brokerage account.
My taxes are taken out of my salary automatically but then I also have a deduction taken out for contributions to AVS (Basic Pension Insurance). Do I add these together for my income tax?
Contributions to AVS and other components of Pillar 1 (AHV/IV/EO, AVS/AI/APG) is not deductible. Likewise, you do not “deduct” income tax - we need to report gross salary and then take the foreign tax credit for income tax (not for the contributions to Pillar 1).
Another example of non-deductible taxes is VAT.
Swiss Financial Accounts
Swiss-US FATCA Treaty Overview
The Foreign Account Tax Compliance Act (FATCA) is a piece of legislation introduced by the United States government in 2010, to help counter US tax evasion.
FATCA model type chosen by Swiss Parliament
There are two FATCA model types.
Model 1, chosen by most European countries, is based on the principle of automatic exchange of information. Financial institutions provide details of all capital subject to US tax to their local authorities, who pass these details on to the IRS.
Switzerland opted for Model 2, according to which Washington is supplied with information directly by the financial institutions – but this only concerns capital held by American customers who consent to their details being released.
For customers who do not consent to this, the financial institutions must tell the IRS the number and the total value of these accounts. The IRS can then put in a request for “administrative assistance” to the Swiss government to get the full details.
What searches do a Swiss bank have to do to comply with US FATCA?
The financial institution must search their data to identify financial accounts held by US Specified Persons, or by foreign entities in which US taxpayers hold a substantial ownership interest.
In order to achieve this, the financial institution needs to search their data looking for any one of seven indications (indicia) that an account holder may be a US person. These indicia are:
- US citizen (check for US passport or green card)
- US residential address
- Place of birth in the US
- US telephone number
- Standing instructions to send funds to a US bank account
- Power of attorney (PoA) or third party authority in favour of a person with a US address
- Use of a c/o or hold mail address
Which types of Swiss financial accounts must the US individual report on FBAR / FATCA?
- Individual bank accounts such as savings accounts, checking accounts, and time deposits
- Retirement accounts -- balance on Pillar 2 and Pillar 3 accounts
- Brokerage accounts, commodity futures or options accounts
- Insurance policies and annuity contracts with a cash value
- Business accounts where U.S person has a greater than 50 percent interest in the entity
Which types of Swiss financial assets are not required to be reported on FBAR / FATCA?
Certain categories of entities are exempt or deemed FATCA compliant because they are considered to present a low risk of being used by US persons to evade US taxes. Examples of such entities/financial products are vested benefits insurances under Swiss law, restricted pension plan insurances (pillar 3a), certain employer-funded welfare funds, and certain investment foundations.
Even though certain retirement plans are exempt from direct FATCA reporting, the FATCA rules applying to individuals were not relaxed. Form 8938 specifically requires reporting by U.S. taxpayers who participate in foreign pension plans.
Swiss financial assets exempt from FBAR/FATCA reporting are limited to Social Insurance (Pillar 1), Real Estate Holding, precious metals held directly, and collectibles.