ACA Town Hall Meeting. 21 September 2015 Zurich. We Understand London Geneva Zurich

Transcription

1 ACA Town Hall Meeting 21 September 2015 Zurich

2 A story

3 Max & Alice go to see their US tax advisor Max was born in Switzerland and became a US citizen in Alice was born in the US. They married in Alice has had income of CHF and has made 2nd Pillar contributions. Alice also had a 3rd Pillar account. Max has not worked, but has received CHF in unemployment benefits.

4 Max & Alice go to see their US tax advisor Max & Alice sold their home in Zurich at for a gain of CHF and moved to Zug. Max was gifted CHF from his Swiss father. They invested CHF of the proceeds from the sale of the house and the gift in a managed fund with a Swiss bank. There are a further CHF of financial assets in joint names.

5 2nd Pillar Swiss tax deduction for employee contributions. Employer contribution is a tax-free benefit in Switzerland. No US tax deduction for employee contribution. Employer contribution is taxable in the US. so taxable income in the US is higher than taxable income in Switzerland. While living in Zurich, even though tax rates are comparable, not enough Swiss tax due to offset all US tax due. Once living in Zug, shortfall is greater still. Income earned within the 2nd pillar taxable when it arises

6 3rd Pillar Swiss tax deduction for some contributions. No US tax deduction for any contributions. Increases the foreign tax credit gap Income earned within the 3rd pillar taxable when it arises From a US tax perspective, this is just an account. Taxable on distribution in Switzerland, creating double tax.

7 Unemployment benefit Taxable in the US Is not earned income, so does not qualify for the foreign earned income exclusion. This is true of all Swiss social benefits

8 Sale of home No Swiss tax due on gain from sale of home in Zurich. Exemption in the US limited to $250,000 per taxpayer. Remainder of gain is taxable at 23.8%. No relief for proceeds invested in new home. Requires that ownership (5 years) and use tests (2 years) are met. Basis and proceeds computed at spot rates at date of purchase and sale. Can materially increase taxable gain given rates.

9 Gift from Swiss father No US tax on the receipt of gifts or inheritances Ever almost unless from a former citizen subject to exit tax provisions. If >$100,000, need to report on Form Substantial penalty exposure for failure to file.

10 Passive Foreign Investment Companies (PFICs) Most foreign investment products are likely to be PFICs. including almost every product offered by a Swiss bank. Gains on disposal: No taxation in Switzerland. Gains pro-rata at sale across entire holding period in US. US tax at highest applicable rate of tax as ordinary income in each year. Interest charge on late payment of tax related to earlier years. To avoid PFIC rules, consider: US products. Quoted shares. Cash products.

11 FBAR/Form 8938 FBAR required to report all foreign financial assets FinCEN Form 114 Previously Form TD F Filed online New due date for 2015: follows Federal tax return and is extendable If aggregate >$10,000. Substantial penalties for failure to file Form 8938 Filed with tax return If aggregate > $200,000 London at Geneva end Zurich of tax year of $300,000 at any

12 The moral of the story Join ACA today!

13 Further information Westleton Drake GmbH Waldmannstrasse Zurich Tel: +41 (0) info@westletondrake.ch For US tax news, table, calendars and calculators download our free App from the App Store or Google Play Store now. Search Westleton Drake