This document summarizes aspects of the Swiss social security system, U.S. taxation of foreign retirement plans, and bilateral agreements between the U.S. and Switzerland related to social security and taxation. The Swiss social security system has three pillars: compulsory old-age and disability insurance, compulsory occupational pension plans, and voluntary individual pension plans. The U.S. allows foreign tax credits for taxes paid to foreign countries and has rules for taxing deferred compensation plans. Bilateral agreements between the U.S. and Switzerland address taxation of pensions and social security benefits and allow certain foreign social security plans to be excluded from U.S. deferred compensation rules.

1. U.S. TAXATION OF SWISS
RETIREMENT AND PENSION FUNDS
Matthew Ledvina, J.D., LL.M. (Taxation)
Anaford

2. Swiss Social Security System
• Pillar I – Compulsory for everyone
– Old-age and survivors’ insurance (AVS)
– Invalidity insurance (AI)
• Pillar II – Compulsory for salaried persons
– Occupational benefit plan (PP)
• Pillar III – Voluntary basis
– Individual provident measures

3. U.S. Foreign Tax Credit
I.R.C. § 901(b)(1): “the amount of any income, war
profits, and excess profits taxes paid or accrued
during the taxable year to any foreign country ….”

4. U.S. – FTC Computation
General

5. Deferred Compensation – 409A
• Qualified Employer Plans
– 401(k)
– Individual Retirement Accounts (IRAs)
• Nonqualified Deferred Compensation Plan

6. U.S. – FTC Computation
With Pillar II

7. Relief???
• Bilateral Agreements
– Income Tax Treaty
– Totalization Agreement
• Certain Foreign Plans
– Treas. Reg. § 1.409A-1(a)(3)(iv)

8. Bilateral Agreements
• U.S. – Swiss Income Tax Treaty (1 Jan 1998)
– Article 18 (Pensions and Annuities)
– Article 19 (Government Service and Social
Security)
• U.S. – Swiss Totalization Agreement (1 Nov 1980)
– Old-age, survivors, and invalidity covered
– Unemployment, occupational benefit plans, and
social welfare not covered

9. Certain Foreign Plans
• Treas. Reg. § 1.409A-1(a)(3)(iv): “In addition, the
term nonqualified deferred compensation plan
does not include a social security system of a
foreign jurisdiction to the extent that benefits are
provided under or contributions are made to a
government-mandated plan as part of that
foreign jurisdiction’s social security system.”

10. Anaford AG
Tödistrasse 53
CH-8002 Zürich – Switzerland
+41 44 567 8805 | Main
Matthew Ledvina
matthew.ledvina@anaford.com

11. Disclaimer
This Presentation is intended solely for information purposes. The opinions contained in this Presentation may be altered at any time. The information
published in this presentation constitutes neither a request nor an offer or recommendation to buy or sell investment instruments or to perform other
transactions or services.
Although Anaford AG has taken all reasonable care to ensure that the information contained in this presentation is accurate at the time of publication, the
details in this presentation do not represent decision-making aids for legal, fiscal or other advice-related questions. Before setting up or making use of any
structure, you should therefore consider the suitability of the transaction to your particular circumstances and independently review (with your professional
advisers as necessary) the specific financial risks as well as the tax, legal, regulatory, credit and accounting implications.
Anaford AG would be pleased to provide you with any legal and tax advice on the matters contained herein upon your express kind request.
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