Structuring of cross-border activities in tax and social security law
ISIS)-Seminar of 21 March 2017 - Structuring cross-border activities in tax and social security law
Case 1 Moving in - British Pension Scheme
Mr. Brown (*1951) was employed by an international service company in London (UK) during his working life and was affiliated to a pension scheme. This pension plan is legally recognized in Great Britain (so-called "tax approved status").
Mr. Brown moved to Switzerland with his family on June 13, 2016. His employment with the international service company ended on June 30, 2016, and on July 5, 2016, Mr. Brown will receive a lump-sum payment from his pension plan.
- How is the retirement benefit taxed in Switzerland under internal law?
- When is the retirement benefit due?
- How is the service treated under international law?
- Would the tax treatment under internal or international law be the same if an annual retirement pension were paid out instead of a lump sum?
- How would a retirement benefit from a comparable pension scheme in Belgium be taxable?
- How would a retirement benefit from a comparable pension plan in Canada be accounted for?
Case 2 Withdrawal - Lump-sum payment from a Swiss pension fund
Mr. Brun (*1951) worked for many years at the Swiss branch of an internationally active service company. Within the scope of his activities, he was affiliated with a pension fund (pension fund of the Sammelstiftung Z).
On 22 May 2016 he moved to Great Britain with his family. His employment relationship ended on 31 May 2016. on 5 June 2016, Mr. Brun will receive a lump-sum payment from his employer's pension fund at Sammelstiftung Z.
- Is the capital payment taxed in Switzerland according to internal law?
- How is the capital payment taxed under international law?
- Would the tax treatment under internal or international law be the same if Mr Brun were to receive an annual pension instead of the lump-sum payment?
Case 3 Moving in - British Occupational Pension Plan
Mr. King, a British citizen, previously lived in England. He concludes an employment contract with a company based here and moves to Zurich.
Through his previous British employer he was insured in an "occupational pension plan" (accumulated assets CHF 300,000). He would like to transfer this credit to his current pension fund of the Swiss employer.
His current insured salary amounts to CHF 150,000, with a maximum regulatory benefit of CHF 600,000 (coverage shortfall) at the time of entry.
- May Mr King transfer the credit balance from the occupational pension plan to the pension scheme of the new employer?
- If so, with what tax consequences?
- What are the tax consequences if Mr. King later retires here (retirement benefit in pension or lump sum form)?
- What are the tax consequences, in terms of credit, if Mr. King should later move abroad?
- Does it make any difference to the payment of pension assets whether Mr King moves to an EU/EFTA state or a non-EU/EFTA state?
- Under what conditions can Mr King make purchases into the Swiss pension fund and deduct them for tax purposes?
Case 4 Pensions and lump-sum benefit from the Netherlands
Ms. van der Heiden is a Dutch civil servant and is resident in Switzerland for tax purposes. She will be retired and will receive a pension from SVB Roermond, which is comparable to the AHV in the Netherlands, because she used to work for a bank in the Netherlands.
The Netherlands has levied a withholding tax on pensions.
- In addition, Mrs. van der Heiden will receive a lump sum of EUR 80,000 from a Dutch pension foundation (comparable to the Swiss 2nd pillar) before her retirement. The contributions to the pension fund were deducted from Dutch taxes. The Netherlands also retains a withholding tax on the capital payment. Rightly?
- Would your answer change if Mrs van der Heiden were to have the lump-sum benefit paid out only after her retirement?
- How is any double taxation in Switzerland prevented?
Case 5 Traditional Individual Retirement Account (IRA)
Mrs. Christen, Swiss citizen, was employed for 20 years with the American branch of a group company based in New York (USA). Within the scope of her activities she has concluded a Traditional IRA ("individual retirement account"). The contributions were tax deductible in the USA. It has increased a credit balance of CHF 150,000 with Bank Y AG in the USA.
Since April 2014 she has been living in Switzerland, where she works at the Swiss branch of the Group company. At the age of 64 (on April 1, 2017) she wants to draw the credit from the "Traditional IRA" as a capital payment (incl. interest = CHF 154,000).
- What is a "Traditional IRA"?
- Is the capital payment from the "Traditional IRA" taxable in Switzerland under internal law?
- How would the taxation take place if Mrs Christen would receive the benefit from the "Traditional IRA" in three instalments, i.e. approximately CHF 51,330 in 2017, 2018 and 2019 or as a periodic benefit for 15 years (15 x CHF 10,260)?
- How is the taxation according to international law?
- Explain the difference from a tax perspective to an American Roth IRA.
- Explain the difference from a tax perspective to a US-401k plan.
Case 6 Foreign pension trust
Mr. D., who lives in Zurich, is 45 years old. He is the beneficiary of a foreign pension trust. The Trust Instrument and the Letter of Wishes state the following:
- The trust assets may be withdrawn in whole or in part from the age of 55 onwards and the income from them is added to the assets annually.
- If Mr. D. dies, the assets will be paid out to his surviving spouse or - if pre-deceased - in equal shares to his descendants.
- In the event of Mr. D.'s total or partial disability before the age of 55, the trust assets may be paid out to Mr. D. in whole or in part at the Trustee's discretion.
- Should Mr. D. become needy, the Trustee could also provide benefits.
The trust assets were increased by voluntary contributions from Mr. D.'s former employer. These contributions were added to Mr. D.'s taxable salary in his country of residence and employment at the time, but the income on the trust property was not taxed on an ongoing basis.
Does Mr. D. have to declare the trust property in Switzerland and is the income from it taxable as income?
Case 7 Foreign pension and transitional provision
Mr. Holländer (*1928) is a Dutch citizen and worked for an international group until his retirement in 1988. He worked for various Group companies worldwide, including as Finance Director of the Swiss company between 1973 and 1978. Throughout his professional career, he built up an occupational pension scheme with a pension fund (PK-NL) in the Netherlands. Mr. Holländer made around 23% of his own contributions. After retirement, he moved to Zurich in Switzerland as a pensioner and now draws a retirement pension from PK-NL.
The pension started before January 1, 2002 and is based on a pension relationship that existed before January 1, 1987.
Within the framework of income taxation, only 80% of the PK-NL pensions were recorded on the basis of the transitional provisions of Art. 204 (1) b DBG and Section 270 (1) StG up to and including the 2009 tax period. In the assessment and assessment procedure for the 2010 tax period, the Cantonal Tax Office of Zurich for the first time took the view that the pension from the PK-NL was not taxable at 80% as before and as declared, but at 100% and calculated the difference accordingly.
In the present case, it is undisputed that the pension is taxable in Switzerland at Mr. Hollander's place of residence in accordance with international double taxation law.
Was the Zurich cantonal tax office right to tax the pension at 100%?
Case 8 Rürup pension
Mrs. Schluckebier is a German citizen and has lived in Switzerland for several years. For more than 10 years she was self-employed in Germany. Today, at the age of 65, she gives up her job for reasons of age.
On the one hand, it receives pension benefits from the statutory pension insurance in Germany as well as from a former company pension scheme. Previously, she made regular annual payments of EUR 10,000 into the German basic pension scheme (so-called "Rürup pension") with an insurance company. She now receives a monthly pension of EUR 400 from this insurance.
- What is a Rürup pension?
- How is this Rürup pension taxable in Switzerland?
Case 9 Pension from German medical care
Dr. med. Angst worked for several years at various clinics in Germany and Switzerland and, as a voluntary member of the North Rhine Medical Care, the pension scheme of the North Rhine Medical Association, continued to pay contributions even after he moved to Switzerland. Since September 1, 2016, he has been drawing a state pension from the German Medical Association.
- How are the benefits to be treated for tax purposes?
- What is the procedure if Germany also taxes pensions?