Last update: 23.09.2024 15:00
US expats in Switzerland often find that the country is ranked as one of the top destinations for expatriates, offering a high quality of life, stunning landscapes, and a stable economy. However, moving to Switzerland and building a life there as a U.S. citizen requires careful planning and awareness of specific challenges, particularly regarding legal and financial matters. To help ease your transition, we’ve compiled key considerations for US expats in Switzerland and their families to navigate the complexities of living abroad in this Alpine nation.
US expats in Switzerland need to understand long-lerm visa options
If you are a U.S. citizen planning to move to Switzerland, securing the right long-term visa is your first step. There are four main types of long-stay visas for stays longer than 90 days:
- Swiss Family Reunification Visa: This visa allows U.S. nationals to join family already residing in Switzerland. Note that not all family reunification visas automatically include work authorization. You may need to apply separately if you plan to work.
- Swiss Work Visa: You need a confirmed job offer from a Swiss employer to qualify for this visa. The process can be competitive. Employers must prove they couldn’t find a suitable candidate from Switzerland or the EU before hiring a non-EU national.
- Swiss Study Visa: This visa applies if you are enrolled in a Swiss educational institution. You must provide proof of enrollment and show you have enough financial resources to support yourself.
- Swiss Retirement Visa: This visa is for retired U.S. nationals moving to Switzerland for non-work purposes. Applicants must prove they have sufficient financial means and health insurance coverage.
Register for your Swiss residence permit
After getting your long-term visa and arriving in Switzerland, you must register at the cantonal migration office within 14 days. This registration is necessary to receive your residence permit. The type of permit depends on your situation:
- L Permit (Short-Term Residence): This permit is valid for one year and is usually tied to a specific job. It can be renewed once, allowing US expats in Switzerland to stay for up to 25 months.
- B Permit (Temporary Residence): The B Permit is valid for one year and can be renewed annually, unless there is a reason for denial. It offers more flexibility than the L Permit and is not always tied to a specific job.
- C Permit (Permanent Residence): After five years of continuous residence, U.S. citizens can apply for a C Permit. You must meet specific criteria, such as passing a language proficiency test. The C Permit offers more stability and rights within Switzerland.
Our tip: Mind the visa for your spouse / family
Not all visas automatically include work authorization for a spouse, you should confirm what type of visa you and your family members will receive to ensure a smooth landing.
Understand the Swiss healthcare system
One key aspect of relocating to Switzerland is understanding the healthcare system. Unlike in the U.S., Swiss residents must buy private health insurance within three months of arriving. This insurance covers basic healthcare services. Although coverage is consistent across insurers, premiums vary widely. This is why many Swiss residents regularly change their basic health insurance. Any insurer in your home canton must accept your application. Additionally, you can choose supplementary insurance for extra coverage, like private hospital rooms or alternative therapies.
Health insurance costs in Switzerland vary based on age, location, and coverage level. It’s essential to compare providers and plans to find the best fit for your needs and budget. Since U.S. health insurance is generally not valid in Switzerland, US expats in Switzerland must secure proper Swiss health insurance to avoid coverage gaps.
Understand your U.S. tax filing obligations
Congratulations—you’ve moved to Switzerland and are now a Swiss tax resident. However, as a U.S. citizen or green card holder, your U.S. tax obligations don’t end when you leave the country 😧.
The U.S. uses a system of citizenship-based taxation. This means U.S. citizens and green card holders must file a U.S. tax return every year, no matter where they live. This requirement continues as long as you hold U.S. citizenship or residency status. Even if you’re paying taxes as a US expat in Switzerland.
US Expats in Switzerland have to report foreign bank accounts
U.S. taxpayers living abroad must report their foreign bank accounts, including those in Switzerland, and file an annual U.S. tax return. You report these accounts by submitting a Foreign Bank Account Report (FBAR) to the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Treasury Department. If the total value of your foreign accounts exceeds $10’000 during the year, you must file an FBAR.
Our tip: Mind the FBAR
It’s crucial to take this requirement seriously to manage your finances as a US expat in Switzerland. If you fail to file an FBAR, you risk severe penalties.
Maximize Benefits as a US expat in Switzerland on Assignment from the advantageous Totalization Agreement
If you are a U.S. citizen on a short-term work assignment in Switzerland, your financial and social security obligations may differ. The U.S.-Swiss Social Security Treaty, also known as the Totalization Agreement, lets U.S. employers keep certain employees on U.S. social security for up to five years when they transfer them to Swiss branches.
As a temporarily assigned employee in Switzerland, you can continue contributing to U.S. social security instead of the Swiss system. You may also remain eligible to contribute to your 401(k) during the first five years of employment in Switzerland. This treaty simplifies your financial situation and ensures continuity in your U.S. retirement planning, which is especially helpful for short-term assignments.
Understand the Swiss social security system (Pillar 1)
For U.S. citizens on local contracts or long-term US expats in Switzerland, understanding the Swiss social security system—known as Pillar 1 or AVS/AHV—is essential. Like in the U.S., both salary and self-employment income are subject to social security taxes. Even without income, if you are aged 18-65 and live in Switzerland, you must contribute to Pillar 1, unless your spouse pays at least double the minimum contribution (530 CHF per year as of January 1st, 2025). A key difference from the U.S. is that there is no salary cap on Swiss social security contributions to Pillar 1, which can result in significantly higher social security taxes for high-income earners in Switzerland.
Additionally, Swiss social security benefits are generally much lower than U.S. benefits, which can affect long-term retirement planning if you rely on these benefits for retirement income. Maximum pension benefits require 44 years of contributions, with an average yearly contribution exceeding 90’000 CHF 🤨. Only then are you eligible for the full individual pension of 2’520 CHF from Pillar 1, an amount that may barely cover rent and basic insurance costs.
Mind the tax impact of Occupational Pension Plans (Pillar 2)
Pillar 2 in Switzerland refers to occupational pension plans, which are mandatory for most employees. Swiss law sets minimum contribution guidelines for both employees and employers, with the rate increasing as you age, and the employer must contribute at least 50%.
Unlike U.S. 401(k) plans, where contributions are usually voluntary, Pillar 2 savings are mandatory for US expats in Switzerland earning over 22’000 CHF annually and can involve significantly higher contributions. Many executives and high-income earners may access generous supplemental plans to build retirement savings quickly. However, for U.S. taxpayers, Pillar 2 accounts are not recognized as qualified retirement accounts under U.S. tax law. While contributions are tax-advantaged in Switzerland, employee contributions are not tax-deductible in the U.S., and employer contributions are taxable in the year they are made. This tax mismatch can create additional U.S. tax liability, complicating tax planning and increasing your overall tax burden.
Avoid the Personal Retirement Savings trap with Pillar 3a
The Pillar 3a in Switzerland functions like a Traditional IRA in the U.S. It allows for personal retirement savings, offering tax incentives (up to around 7’000 CHF per year is fully tax-deductible) and is commonly used by Swiss employees to supplement mandatory Pillar 1 and Pillar 2 savings. From a U.S. tax perspective, however, these accounts are seen as foreign brokerage accounts, potentially causing extra tax issues. Contributions to a Pillar 3a by US Persons may increase U.S. tax liability due to differences in tax laws between the U.S. and Switzerland. Additionally, investing in non-U.S. mutual funds within these accounts can trigger Passive Foreign Investment Company (PFIC) rules, leading to complex reporting and possible tax penalties. This tax discrepancy requires US expats in Switzerland to evaluate carefully before contributing to a Pillar 3a account.
Be Cautious About Finance Watercooler Talk
Switzerland offers attractive tax benefits and incentives, often discussed casually among colleagues. However, as a U.S. taxpayer, it’s essential to be cautious in these conversations.
Many tax incentives that benefit Swiss residents could increase your U.S. tax liability or complicate your U.S. tax filings. For example, Swiss investment opportunities, tax-advantaged accounts, or deductions favorable under Swiss tax law might have unintended consequences under U.S. tax law. The U.S. has its own regulations, including worldwide income taxation, foreign financial account reporting, and PFIC rules. Without understanding these complexities, you could make financial decisions that lead to significant tax problems. To avoid issues, consult a tax or financial advisor with expertise in US/Swiss cross-border planning. What works for your Swiss colleagues may not be suitable for you as a U.S. taxpayer.
Wrap-Up: US expats in Switzerland – Your Guide to Navigating Taxes and Social Security
After obtaining a visa to work in Switzerland, you will need a Swiss resident permit to live here. Once settled, you must join the Swiss healthcare system to ensure you have health insurance coverage. When you begin working, taxes become relevant. U.S. taxpayers remain liable for U.S. taxes and must file a U.S. tax return while reporting their foreign bank accounts. The Swiss social security system, including mandatory Pillar 1, occupational benefits, and voluntary retirement savings plans, differs from the U.S. system and may present unexpected tax challenges. To avoid these tax traps, it is advisable to consult a professional advisor regarding your situation as a US expat in Switzerland.
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.
