THE INTERNATIONAL TAX ADVISOR
by: Douglas J. Kingston, CPA/MBA • Mailing Address:
INCOME TAX TREATY – ISSUES FOR SWISS INVESTORS IN
It is important for Swiss investors in the
After 17 years of negotiation,
In general, a tax treaty is a written agreement between two countries providing uniform bilateral tax rules intended to avoid double taxation of their crossborder citizens and/or residents. Tax treaty provisions override each signatory country’s own tax laws and may be invoked by the taxpayer if the treaty rule provides a lesser tax than domestic law of the taxing country.
This article focuses on some of the more common
The new treaty does not
Under Swiss domestic tax law, generally, a Swiss
resident’s overseas net rental income is subject to Federal tax at rates up
to 11.5% and Cantonal tax at rates from 14% to 35% (with credit for foreign
country income taxes paid). However,
the Switzerland-U.S. income tax treaty overrides Swiss domestic law with the
Rental Income and Expense (continued)
Swiss income tax. Though not taxable, the exempt income is taken into account in determining the tax rate on other Swiss-taxable income (this is known as the exemption-with-progression rule).
The Switzerland-U.S. income tax
treaty does not override
Under Swiss domestic tax law, a Swiss resident’s overseas
real estate gain is subject to Cantonal, but not Federal, capital gains
tax. However, the Switzerland-U.S.
income tax treaty overrides domestic tax laws with the result that
The existing Switzerland-U.S.
estate tax treaty ratified in 1952 remains in effect. Under U.S. domestic tax law, the value of
U.S. assets of a nonresident decedent who is not U.S. citizen is subject to
tax at graduated rates up to 55% after exemption of only $US60,000 (not the
$US600,000 increasing to $US1 million by the year 2006 available to U.S.
citizens and residents). However,
under the Switzerland-U.S. estate tax treaty, the larger exemption is
available to Swiss resident decedents “prorated” on the basis of
Under domestic tax law, most Swiss Cantons (but not the Federal government) impose inheritance and gift taxes on the value of worldwide assets except real estate located abroad.
This article considers U.S. Federal, but not
Douglas J. Kingston is an Arizona certified public accountant (CPA) specializing in international tax planning and compliance for U.S., Canadian, European, Latin American and Asian business and individual clients and may be reached by: