theOAP

"The Swiss pension may cause problems (and tax software may be unusable - disbursements issued in Swiss Francs but taxed in £'s under a UK/Swiss treaty (?))."


@kodokan

I had one of those spontaneous thoughts out of no where today while out shopping, and it concerned your Swiss State Pension. It may have been when I passed the cheese shop with the 'raclette' sign in the window.

I believe Pillar II and III pensions are reported on a US return when distributions are made in retirement. But, I'm unsure of Pillar I.

There's a never ending discussion on the UK-Y site about US reporting requirements for a USC, resident in the UK, when receiving a UK State Pension distribution. The wording of the US/UK treaty implies 'yes' but it's obvious the intention was 'no'. The UK/US treaty is riddled with ambiguous statements. Have a look at the US/Swiss treaty (if you're interested). Perhaps it's more clearly written, and a Swiss Pillar I is not reportable on a US return in draw down stage.

kodokan

Very helpful as always, theOAP - have printed your full reply and tucked it into my tax folder so it'll generate some more research nearer the time.

kodokan

It's only Pillar I - we had Pillars 2 and 3, but cashed them out fully upon leaving Switzerland (tax deal of the century, as we were no longer Swiss tax resident, but hadn't yet - because of a short year and Substantial Presence - become US tax resident).

It'll be about $4k annually, so not a terrible amount of money if it works out that the tax situation is a bit ambiguous, and we decide to take the safe rather than the adventurous filing choice.

Thanks for following up - I appreciate all your thoughts on this.

Steve_

I think this has turned into an internet myth. He threatened to renounce but I don't think he ever actually did, and he did get dinged for capital gains tax but when I saw him interviewed on the BBC he seemed to be saying it was on a variety of things, and I think his principal residence would be exempt.

In any event, the US long-term capital gains tax rate is a lot less than the 28% rate in the UK so it's just a case of claiming a foreign tax credit on 1116. He doth complain too much.

But it does illustrate the point that the IRS will come after you abroad, like they did to my uncle. My uncle was a very wealthy guy and he was on the BoD of a major US corporation at one point so they clearly went out of their way to track him down.

Was it? I think it was like $300 or something like that.

That's another myth I think, I don't think Eritrea does tax people on the basis of citizenship. It's purely a US thing.

The reason for the US doing it this way is because they had a lot more wealthy people a lot earlier on who were trying a lot harder to avoid tax. As I recall the US was the first country to stop tax avoidance by people dumping it in a foreign corporation (subpart F tax). Hence form 5471.

So you can't just move to The Bahamas and route everything through a Bahamian corporation to avoid US taxes. You have to renounce citizenship first.

Yeah I forgot that change, the way the US does it now is how Canada does it, effectively deemed disposition. Or rather, in a similar way because the Canadian method (as per usual) is more straightforward. Principal is the same though.

Steve_

Like I was saying in the Class 2 NI thread, the problem with HMRC is they keep dumbing stuff down so that people can understand it and in so doing, make it useless. I honestly cannot figure out how much I would get from my State pension now, the guidance document is just too vague. I'm just going to leave it another year and then get a statement from the DWP.

Whereas with the IRS, everything keeps getting more and more complex and the guidance keeps getting harder and harder. Jesus, they referred me to Rev Proc 2014-39 the other day. Finally I found the information I wanted buried on page 77.

Compare and contrast with the education systems, where in the UK apparently people are supposedly getting smarter and smarter and in the US various public school systems are on the verge of collapse.