Pillar 3a is an important component of retirement planning in Switzerland for U.S. Persons as well. But U.S. citizens or dual U.S. citizens residing in Switzerland often have a hard time establishing a Pillar 3a with securities. Discover what a US person is, why many Swiss banks don’t want US persons as clients and with which providers you can set up a pillar 3a as a US person.
What is a US person?
A US person is a person who either has US citizenship, lives in the USA, has a permanent residence and work permit (such as a US green card), or has spent more than 31 days in the USA within one year and more than 183 days in total in the USA in the last three years. Legal entities that are incorporated under U.S. law or have their registered office in the U.S. are also considered U.S. persons. The same applies to individuals who may be subject to U.S. tax for other reasons, such as owning a second home, filing a joint tax return with a U.S. person, or having renounced U.S. citizenship or long-term U.S. residency.
Why do many Swiss banks not want US persons as clients?
The USA is pretty much the only country in the world that taxes its citizens solely on the basis of their nationality. Therefore, it does not matter to the U.S. tax administration where its citizens live. You have to file a tax declaration every year.
And that’s where FATCA (Foreign Account Tax Compliance Act) comes into play for U.S. persons with its special tax reporting requirements. FATCA is a U.S. law and is intended to combat tax evasion by U.S. persons for foreign accounts. The FATCA reporting requirements also apply to Swiss banks that have US persons as clients.
Because of the high costs and administrative burden associated with complying with FATCA requirements, many Swiss banks do not want U.S. persons as clients. Because then, for example, they have to automatically transmit information about their American customers to the US tax authority IRS. US persons therefore often have problems opening a bank account in Switzerland, getting a mortgage or even a pillar 3a.
Does a pillar 3a make sense for US persons?
As a US person, you are subject to tax on pension assets in the USA. As far as we know, any gains you make in your pension plan as a US person are taxed at a very high rate. In addition, the IRS regards payments made by US persons into restricted pension plans (second and third pillar) as taxable income. Against this background, it is questionable whether it is worthwhile for US persons to save for retirement in pillar 3a with securities. We therefore recommend that you discuss the situation with a qualified expert before making payments into pillar 3a.
Are you an US Expat living in Switzerland and want to know more?
Whether you’re wondering how a professional advisor can help manage your US and Swiss tax obligations, navigate the Swiss pension system or seeking guidance on financial planning strategies while living abroad, this initial conversation will give you clarity.
Who offers a pillar 3a for US persons?
Although most Swiss banks do not want US persons as clients, some providers do allow US persons to invest in Pillar 3a solutions with securities.
Accept U.S. persons as clients in pillar 3a:
In October 2023, Smolio conducted research among major providers of digital pillar 3a solutions. The following providers accept U.S. persons as customers:
- Finpension1 does not want to patronize its customers. In principle, they have no problem with a US person making a pillar 3a with finpension, but they do not recommend it. They also explicitly point out in the onboarding section of the app that they cannot provide tax advice or reports for the fulfillment of any US reporting obligations.
- Inyova21
The following providers do not accept US persons as clients in pillar 3a:
Smolio researched major providers of digital pillar 3a solutions in October 2023. The following providers explicitly exclude US persons for pillar 3a:
- Frankly
- Selma
- Truewealth
- Viac
- Vontobel Volt
- Yapeal
- Yuh
Do I have to close my 3a custody account when I emigrate?
That depends on the provider of your pillar 3a solution. Some only accept clients residing in Switzerland, others also accept clients residing abroad. The details are best clarified directly with your provider.
What happens to a Pillar 3a for US persons when they leave Switzerland?
When you leave Switzerland for good, you can withdraw your Pillar 3a assets without any restrictions. A capital gains tax is then incurred. Or you may optionally leave it and have “an account in Switzerland” (if your current provider allows this for customers residing abroad). Depending on which country you move to, there are different tax consequences. You can find out more in this article.
Summary: Pillar 3a for US individuals
US persons are subject to US taxation worldwide. The U.S. law FATCA is intended to combat tax evasion by U.S. persons abroad. The associated expenses and reporting requirements mean that many Swiss financial services providers and banks do not offer Pillar 3a solutions for US persons. As a US person, you can (as of November 2023) take out securities solutions with finpension and Inyova 3a. You should first check with a qualified tax advisor whether this makes sense.
Open Inyova Pillar 3a
Enter promo code SMOLIO in your Inyova dashboard under “Promotions” when you open your Pillar 3a or Inyova Invest account and before you deposit money. Thanks to the Inyova Friends Code you will not pay any fees for 12 months.
Notice
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Disclaimer
We have taken great care in compiling the content of this article. Nevertheless, we cannot rule out errors and cannot guarantee that the content is correct, up-to-date or complete. This article does not replace tax advice. We do not offer investment or tax advice and recommend that tax issues are always clarified with a tax expert and/or the relevant cantonal tax authorities. Any liability is rejected.
- Website finpension Retrieval 29.10.2023 and personal conversation with finpension ↩︎
- Website Inyova, retrieval 29.10.2023 ↩︎
Last update: 02.12.2024 20:27
