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Moving (Back) to the US from Switzerland – Here’s What You Need to Know

May 23, 2022

Whether you are moving back to the US after an expat assignment, for retirement, or for new opportunities, there are some key points you need to consider before the move.

US persons leaving Switzerland

Pillar II

Many US taxpayers choose to withdraw their Swiss occupational retirement account (Pillar II) as a lump sum distribution when they leave Switzerland. Swiss taxes will be withheld at the source at a preferential rate which is lower than ordinary income tax rates. The withholding percentage varies from canton to canton.

What US taxpayers need to know:

  • US taxpayers can file for a refund of Swiss withholding tax (quellensteuer rückerstattung in German, remboursement de la retenue à la source in French) by filling out a refund form and providing documentation to demonstrate that the US taxed the Pillar II.
  • If the refund is denied, the Swiss tax can be used as a foreign tax credit.
  • The amount that is taxable on the US return will be the disposition amount (converted to USD at the spot rate) minus the US tax basis (the amounts that has been included in US taxable income.)

Foreign Tax Credits

Due to mismatches in the US and Swiss tax laws, there may be a build up of foreign tax credit carryovers on the US tax return.

What US taxpayers need to know:

  • Work with your financial planner and US tax advisor to strategize how to “soak up” foreign tax carryforwards so that they are not lost.

Non-US persons moving to the US

Immigration issues aside, foreigners should enter the US tax system with care and careful planning. Many nonresident aliens have assets that can complicate their US tax filings once they become US taxpayers. Swiss business entities, non-US domiciled mutual funds or ETFs, privately funded retirement accounts, life insurance products, trusts or foundations, and foreign mortgages to name a few, can create additional complexity.

What potential US taxpayers need to know:

  • Planning is essential. An inventory of assets, retirement, investments, business interests and an understanding of how each will be treated under US tax law will help prospective US taxpayers make informed decisions before they need to file US resident income tax return.

Non-tax related items to consider

Maintaining bank accounts to receive tax refunds, rental deposits, or to make trailing payments is recommended in the short term but can be difficult in practice. Swiss banks due to their own filing and compliance requirements can often force non-Swiss residents to close financial accounts. Maintaining these accounts can prolong foreign financial account reporting.

KLR’s International Tax Services group is passionate about helping you plan for US repatriation and/or inbound US tax. Contact us, we’re ready to help.

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