In 2009, there were 74,966 Swiss people registered as living in the United States. This represents approximately 1% of the Swiss population. While America enjoys a reputation as a welcoming country for business opportunities and new enterprises, the complexity of moving there is often underestimated. A number of issues such as taxes, social security, savings, investing and the banking system should be investigated carefully before moving to the United States.
"A few days after moving to the United States, I was asked by my Swiss bank to close my account and to sell all of my assets. They gave me 45 days to find a new bank and to operate the transfer. This happened at a very bad moment [during the financial crises in 2008] and I had a significant loss."
"I wanted to keep my Swiss credit card but I was asked to leave a CHF10,000.00 deposit in Switzerland in order to do so. I did not expect such proceedings after a 20-year relationship with my bank."
"I recently discovered that I could have kept contributing to the Swiss Social Security (OASI/DI - first pillar) instead of the American one. It is now too late to come back to the Swiss one. This is annoying because I have heard that I will lose a couple of years of contribution to the OASI/DI."
These quotations from Swiss people who have recently moved to the US illustrate a few of the more common problems that can be faced by our compatriots. Some issues can be anticipated and are easy to plan for, but others can come as a surprise and cost lots of time, money and frustration. Now, the internet can provide some assistance, but the information is mostly scattered and can be difficult to find. Additionally, the advice is often ill-suited to an individual's specific situation or inaccurate and outdated information can be passed from one person to another.
Since so many Swiss people choose to move from Switzerland to the US, we decided to compile a list of some useful information from Swiss citizens and professionals in order to help Swiss people who have moved or are planning to move to the United States.
Tips for Swiss citizens moving to the US
Prior to departure
1. Check with your bank if they still accept US resident clients. Some of the main Swiss banks discriminate against US residents regardless of the duration of the relationship and their nationality and no longer accept them. Cantonal or private banks may be a good option to keep an account in Switzerland, as well as the Postbank. If you can even have two separate bank accounts before moving to the US, this gives you additional security.
2. Selling appreciated financial investments before moving to the United States may allow you to benefit from the Swiss exemption on taxation on capital gains and avoid this US tax. It may also allow you to avoid a prohibitive taxation in the US, since most of the non-US investment funds can be prohibitively taxed and have complex reporting requirements. US income taxes can go well above 50 percent on gains of non-US investment funds. After settling in the United States, similar investments can be purchased again, but are often more efficient to buy on the US markets. Large US Brokerages such as Fidelity, Charles Schwab and Vanguard offer trading fees at a small fraction of the price of similar services in Switzerland.
3. More sophisticated solutions may be found for specific investment situations but they can be expensive and subject to constant legal changes. When regulations tend to be more restrictive, an unclear/suspect solution today may become unlawful tomorrow: the recent turbulence between UBS and the US is a good example. Work with an experienced tax and/or legal advisor who specialises in working with Swiss people overseas. It is even better if your investment advisor is experienced in working with non-US nationals living in the US.
4. Consider that the exchange rate between CHF and USD is subject to significant fluctuations, up to 30 percent or more per year. For instance, a mortgage in one currency can be at risk if your future income will be earned in the other currency only. This may also have US tax implications as you pay down your Swiss mortgage. Financial derivatives may be used to hedge against detrimental exchange rate moves.
5. Working in the US as a posted worker (travailleur détaché) or as a non-US resident implies that you keep your Swiss residency. The health insurance must then fulfill the Lamal's requirements. However, the solutions provided by Swiss companies when living for more than a year in the United States may be prohibitive, but a solution may be found even abroad. A positive experience was relayed by a Swiss citizen who gets a Lamal compatible health-insurance through "Expatplus", a plan offered by Vanbreda International.
6. Expats with children should be well aware that the quality of public school can vary significantly from one town to another. Private schools (especially French or German schools) may be considered, but can be relatively expensive. Moreover, the Swiss family benefits are only paid for Swiss resident children (art. 7 OAFam) and since no bilateral agreement exists between the two countries for child benefits, Swiss children of a family domiciled in the United States cannot be granted the family benefit.
7. The websites of the Federal Department of Foreign Affairs and the Federal Office for Migration provide useful information on most of the important administrative issues for Swiss emigrants. It may be worthwhile to have a look through the "Aide mémoire pour les Suisses de l'étranger" available on the FDFA's website in French, German and Italian.
8. Think about the implications of your US Visa status. Whether or not it requires that you become a US resident has a significant impact on your health insurance, taxation, social security and savings. In general, the law of the country of residence applies but with many exceptions through bilateral agreements.
When in residence
1. It is possible to ask for an optional OASI/DI (first pillar) within a period of one year after the exit of the compulsory OASI/DI. According to the recent judicial decision of the Swiss Supreme Court, virtually no delays are granted unless "exceptional circumstances" are recognized. An example describing such circumstances was the case of a Swiss citizen detained in a Russian jail.
2. Contributing to the optional OASI/DI (maximum of 5 years) may be a suitable solution if you plan to stay less than three years in the US. For longer stays however, the US Social Security System offers some interesting aspects: higher benefits for a non-working spouse, eligibility for Medicare (the US national health insurance system for people age 65 or older, or who are disabled) after 10 years of contribution, or flexible solutions as to when you decide to start collecting your benefits in both countries.
3. Due to the Totalization Agreement (Bi-lateral Treaty covering Social Security and related benefits) between the US and Switzerland, each country counts your credit in the other country. As a result, you may claim for benefit in both countries even if you have worked less than ten years in the US. The Totalization Agreement is available on the internet, but additional information may be obtained from the Federal Benefits Unit at the US Embassy in Bern (tel: 031 357 72 35).
4. Always keep records of your contributions and US tax basis in the 2nd pillar or the equivalent pre-tax accounts in the United States. This may allow you to avoid double taxation.
5. US residents are generally not able to contribute to a third pillar in Switzerland, but may be eligible to contribute to a US IRA (Individual Retirement Account) in order to defer or eliminate US taxation on some of their retirement savings.
6. US life insurance can be much more attractively priced than those offered by Swiss companies. After becoming a US resident, you may purchase US life insurance, even if you are considering a short term stay, since you will be able to retain your US-based life insurance after moving back to Switzerland or elsewhere.
7. If your child is born in the United States, you will have to register the child's birth with the Swiss consulate or Embassy. Your child will likely be eligible for US citizenship as well. This can have both advantages and disadvantages later in life.
8. Succession law is more flexible in the US, though estate taxes can be higher and the laws have been changing every couple of years. For instance, in the case of a couple with two children, the testator can only leave a maximum of five eights of the succession to his or her surviving spouse since the compulsory portion for the children is three eights of the succession. After becoming a US resident, a solution can be found to favor one or the other of the heirs more freely.
9. Coverage of liability for vehicles and personal liability is not always mandatory but is a good idea in the US. It is important to have adequate insurance when liability can be very high, and many companies will offer an "umbrella" liability policy for additional coverage above your standard vehicle and home owners or home renter's policies. Also keep in mind that whilst subject to some variations between states, Swiss driving licenses are in principle valid up to 1 year in the US. Check with the Department of Motor Vehicles in the state where you will be moving to for more information.
10. Under certain conditions, Swiss people who come back after a stay in the US (non EU-member country) are entitled to unemployment benefits. You may not only benefit from the unemployment subsidies but also from advice and support when looking for a new job in Switzerland. The proceedings should be initiated immediately after arriving in Switzerland, as the deadline expires after the first year of residency.
11. When thinking about starting a company in the US, the connections and expertise of Swissnex, located in both San Francisco and Boston, may save you a lot of time, energy and money. Both are located close to strategic locations, respectively Silicon Valley and MIT, and their goal of "connecting the dots" may help you to find the appropriate partnership for your firm.
Planning any international move is both exciting and stressful for almost every individual or family. If you can make contact with people (often in on-line forums) who have recently moved across the same borders you are planning to move, you may find a wealth of information. However, keep in mind that your situation may be different, so do not hesitate to confirm the information with a professional. Few people possess a global vision of the situation. The United States, due to its relatively complex legal and tax system, presents some unique challenges, though many of them can be planned for as long as you are well informed. Bon courage!
Guillaume Francioli was admitted to the Geneva Bar and currently works for a Law Firm in Boston. He possesses a Master degree in Economics and a DEA of International Relations (HEI). You can visit his website here.
Jonathan Lachowitz is a Certified Financial PlannerTM professional in both the United States and Switzerland and is a board member of the Swiss Financial Planning Organization. You can visit his website here.
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Swiss citizens planning on becoming US residents need to plan ahead. Guillaume Francioli and Jonathan Lachowitz, both experts in the legal and financial needs of Swiss expats in the US, offer this list of things to consider.
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