topics
tools
Expatica countries
editor's choice

How to assimilate

Crime and the legal system in Switzerland

Major museums in Switzerland

Culture and social etiquette in Switzerland

How to open a Swiss bank account

Index Last Var.(%)
BEL 20 2119.44 0.28
DAX 6339.94 0.38
IBEX 30 6543 0.13
CAC 40 3047.94 0.32
FTSE 100 5351.53 0.03
AEX 292.76 0.23
DJIA 12454.83 -0.60
Nasdaq 2837.53 -0.07
FTSE MIB 13154.8 0.36
TSX Composite 11576.47 0.09
ASX 4081.2 -0.61
Hang seng 18713.41 0.25
Straits Times 2772.75 -0.24
ISEQ 20 500.94 1.55
You are here: Home Finance & Business Tax Swiss residents: Cash in your US retirement

Tax

archive
Enlarge font Decrease font Text size


15/12/2009Swiss residents: Cash in your US retirement

Swiss residents: Cash in your US retirement Financial planner Jonathan Lachowitz explains why now is a good time for non-US Swiss residents to cash in a US retirement plan.

If you are a Swiss resident, not a US citizen or permanent Green Card holder, and you have a retirement account (a traditional IRA, SEP-IRA, 401k or 403b) in the United States, now may be the right time to cash in your US-based retirement plan; especially if you are much younger than 65 years old. If you are like many investors trying to save for retirement, your account balances are significantly lower than when the equity markets peaked in 2007 and you may regret holding US dollars that are depreciating against the Swiss franc faster than banking stocks dropped during the last quarter of 2008.

Thanks to the current double taxation treaty between the US and Switzerland, a Swiss resident does not have to pay any US taxes or penalties for the early withdrawal of a US-based retirement account.


Article 18 of the treaty, available here, states the following:

Article 18: Pensions and annuities

1. Subject to the provisions of Article 19 (Government Service and Social Security), pensions and other similar remuneration beneficially derived by a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

2. Subject to the provisions of Article 19 (Government Service and Social Security),
annuities derived and beneficially owned by a resident of a Contracting State shall be taxable only in that State. The term “annuities” as used in this paragraph means a stated sum paid periodically at stated times during a specified number of years or for life under an obligation to make the payments in return for adequate and full consideration (other than services rendered).

It may make sense to cash in these retirement accounts now because upon withdrawal, the funds are taxable as income in Switzerland. With the lower account values and weak dollar, your Swiss income tax will be lower. Once the money is out of the retirement account, you can consider investing in equities, where you have no capital gains tax in Switzerland; the bigger the gain, the more Swiss tax you are saving by cashing out of the retirement account early. By transferring the funds back to Europe and out of US equities, you may also be able to protect your funds from US estate taxation, which is governed by the Switzerland-US inheritance tax treaty of 1951.


As always, before making any decisions based on this information, it is recommended that you seek the advice of a competent tax advisor as each person’s situation may be different.

Text: Jonathan Lachowitz, White Lighthouse Investment Management / Expatica 2009

This article was originally published in L’agefi



0 reactions to this article

Be the first person to add a comment

General rating: Not rated yet

Rate article:    Add my rating



0 reactions to this article

Be the first person to add a comment
Finance essentials
Finance expert Q&A
ask your question
Finance A-Z listings
find the business you need
Discussion Forums

Finding your way in Switzerland

Trekking and Backpacking

Community Noticeboard Switzerland

Let's coach..Saturday.Free.In English.

Finding your way in Switzerland

Chinese Nanny (Ayi) wanted

Finding your way in Switzerland

Need Househelp who prepares Thai food

Student forum Switzerland

@SAP Business Objects Online Training in Netherlands by SAP BOSS

participate in the forums

Inside Expatica
Residence and work permits in Switzerland

Residence and work permits in Switzerland

How to apply for a residency or work permit in Switzerland for you and your family.

How to rent and buy a house in Switzerland

How to rent and buy a house in Switzerland

Information about renting property and obtaining a mortgage in Switzerland.

Switzerland's healthcare system

Switzerland's healthcare system

Information about the Swiss healthcare system, health insurance, pharmacies and emergency numbers.

Banking in Switzerland

Banking in Switzerland

Explaining Swiss currency, banknotes, credit cards and bureaux de change.