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Moving to Switzerland for a Job? Here’s What You Should Know about US and Swiss Taxes

December 20, 2021

Are you headed to Switzerland for a job opportunity? Your tax situation is a bit unique. Here’s what you should know.

Are you a U.S. taxpayer heading to Switzerland for a job? In most instances, Swiss tax residents will pay income taxes on their worldwide income and wealth taxes on their worldwide net worth. Certain assets may be exempt from wealth tax, for example some US qualified retirement accounts. What else should you know before making the move? We share below.

Income and Wealth Taxes

What US taxpayers need to know

  • Unlike most countries, the US retains the right to tax its citizens, permanent residents (aka green card holders), and tax residents on their worldwide income.
  • Most US taxpayers living in Switzerland will file their Swiss tax declaration first, and then their US tax return to take advantage of the foreign tax assessed by Switzerland.
  • It is typical to open a local bank account and acquire a pension account outside the US which may require informational reporting of bank and financial assets.

Swiss tax is assessed at three levels: federal, cantonal (state), and communal (municipality) on the calendar year.

  1. Federal – at this level income is taxed at graduated tax rates and there is no tax on net worth.
  2. Cantons – Switzerland has 26 cantons; each could govern tax rates within their state. Income and wealth taxes at graduated tax rates are assessed at the cantonal level. The canton of Zug is known for its low tax rates.
  3. Commune – each canton is comprised of communes, which also assesses income and wealth taxes. The canton of Schwyz is touted as having the lowest maximum communal tax rates.

What US taxpayers need to know

  • Income taxes assessed at the federal, cantonal, and communal level may be utilized as foreign tax credits.
  • Wealth taxes are not eligible for foreign tax credits. Depending on individual circumstances they may be considered deductible or a business expense.

Other Swiss Taxes

In addition to income and wealth taxes, there may be property taxes, dog taxes, radio and tv license fees, and value added taxes (VAT), just to mention a few.

Social Security Taxes are paid by both the employer and the employee (or self-employed may pay both portions.)

What US taxpayers need to know

  • Individuals cannot deduct property, dog, radio and tv, VAT, social security, and other miscellaneous taxes or fees as foreign tax credits, but businesses may use them as a deduction in certain cases.

Most people coming to Switzerland for an employment opportunity will have income and social security taxes withheld from their pay and will file a tax declaration to reconcile the withholding with the taxes they have assessed in the annual tax declaration.

What US taxpayers need to know

  • Due to differences in the US and Swiss tax laws, the income subject to tax may be higher in the US than in Switzerland.
  • Employees should be aware of compensation that may be tax exempt, or tax deferred in Switzerland that is not treated similarly under US tax law. For example, employee pension contributions and social security taxes are deducted from taxable compensation for Swiss tax purposes, but not for US. Many employees receive a “representation” stipend which is tax exempt in Switzerland but must be included in US compensation.

An employment opportunity in Switzerland can be a great experience but will be even more rewarding with pre-move knowledge and tax planning. KLR International Tax Services is here to help, at our various offices in the US or at our office in Switzerland.

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