Dividend taxes for expats in CH with fiscal residence in EU country

Hi dear community. Wondering how many of you are in the following scenario and how is the tax policy in this case for expats in Switzerland.

  • working and living in Switzerland
  • fiscal residence in an EU country (so fiscal residency not moved to CH, since I own property in my birth country, where I also have the permanent passport domicile)
  • permit B owner in CH (5 years)

In this case, my state declared that I am 100% fiscal resident in my country (RO) and all taxes apply according to the double taxation treaty between RO-CH. Which means:

  • gains from rent property in RO are taxed in RO
  • gains from income in CH (salary) is taxed in CH

In this case, how would the dividend taxes apply and where should these be declared?

Thank you.

Sorry, but if this is true, you are a taxable resident in Switzerland.

The property outside of Switzerland means you might own money to the country of your residence.

Finally, even being on a B permit, owning more than a certain amount of wealth means you might need to do a full tax declaration to the Swiss authorities (in Zurich, it is 85’000 CHF if I remember). I would take contact with the tax office of your Gemeinde asap to clarify your situation.

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But it could be that wealth of this property is taxed in CH, and you may still have to declare this income in CH (but pay no taxes on it if you prove you paid it in RO.

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If you live and work full-time in Switzerland, I expect Switzerland to be your primary tax residence and you have to pay income taxes here on your worldwide income, with the exception of foreign real estate. Romania will likely require you to pay taxes for the rental property (and less likely also for citizenship). However, your primary tax residence would still be Switzerland and thus, securities and their dividends would be fully taxable in Switzerland (just like your salary). You have to declare them in the regular Swiss tax declaration (assuming you have to fill one out). Dividends are normally not taxable in another country solely because you have real estate there. However, I don’t know whether Romania has some unusual rules in this regard.

You also have to declare the value and income of foreign real state in the regular Swiss tax declaration (again assuming you have to fill one out). It should not be taxable for income or wealth tax purposes in Switzerland, however, it does impact the tax rate.

I.e. in the tax declaration/software you will calculate two values for both net income and wealth. One is the total taxable, which includes foreign real estate. And the other one is ‘taxable in Switzerland’, which doesn’t include foreign real estate (but still includes securities/dividends). The former is used to calculate your tax rate (satzbestimmend) but the tax rate is then multiplied only with the ‘taxable in Switzerland’ (steuerbar) amount to calculate the taxes you have to pay here.

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Thank you first of all for your answer Jay. This is the thing… Because I own property in my home country, RO established my fiscal residency there and tax liability there… Regardless where you work/ stay, you could have fiscal residency in another place. But this makes paying the dividend gain tax hard because I am not sure where to pay it. In Ro you don’t pay tax on dividends only when you sell. I might need to talk to an international fiscal advisor.

If you live in Switzerland pretty sure you’re tax resident there and not in RO (though as other pointed out you’re likely still liable to taxation on your real estate properties).

There’s a DTA between Romania and Switzerland so it should be a clear cut case: Fedlex

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I filled up in RO documents to move to CH my fiscal residency, but since I own property there, I got back a statement saying that I am still a RO resident and I have full tax liability in RO. It’s seems wrong to me, since I live in CH. And it makes my dividend tax hard to identify where it should be declared and paid.

Unless you come back often, have close family there, etc. Art 4, 2. a) should apply and you’re a resident of CH and therefore are taxed there except for real estate.

Maybe send them the Romanian version of the DTA.

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Did you argue and prove that to the Romanian tax authority?

I.e., job in Switzerland, salary in Switzerland, how much time you’re spending in Switzerland, etc.?

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Romania can’t unilaterally decide that your primary tax residence is in Romania. If you live and work in Switzerland throughout the year, Switzerland will surely consider your residence here the primary tax residence. It can get more complicated if you have multiple places of residence. However, as I understand it, you only have a rental property in Romania and you don’t live there anymore, so the case should be fairly simple. This is also written in Art. 4 of the RO-CH double taxation treaty.

So my previous answer still stands. And you need to talk to the Romanian tax authority and tell them that you don’t live in Romania anymore and your primary tax residence is in Switzerland. Refer to Art. 4 of the double taxation treaty. Maybe you can also get a confirmation of primary tax residence from your canton/town and send that to the Romanian tax authority.

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Yes, but I am not a permanent resident in Switzerland, I own only a B permit, so I am still a permanent resident of RO. By this criteria, permanent residency, they said I am tax liable in RO.

I think they might, considering I am not a Swiss citizen, but a RO citizen. Permanent residency means where I have my permanent address. Until I get the C permit, I think I am only a temp resident of CH. But I am not sure, so will write to some financial advisors for double checking.

I know many people who moved from their home country to CH to work on a B permit who owned property in their home country and were all treated as tax resident here in CH, not home country

If you live and work in CH you meet the criteria to be resident of CH and subject to Ch tax. I do not know laws of RO but if you also meet the criteria be resident of RO and subject to RO tax then my understanding is that is when the DTA kicks in.

I scanned the DTA from the link above article 4
In English:
“if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests)“

Do you rent an apartment in CH? Then I am not an expert on how this is interpreted but I would assume that must count a permanent home available to you.

I cross checked the CHRO DTA versus CH UK one and it is essentially the same in this respect.

Is your property in RO rented out? Then it is not available to you

Even if your property in RO is available to you, if you don’t have wife and kids living in RO and your job is here in CH then your personal and economic relations are closer here in CH

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B permit is residency. Tax-wise, the fact that it’s not not called “permanent” means only that you’re taxed at source. Other than that, you’re a Swiss resident my friend. A C permit can also be revoked under some circumstances.

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B EU/EFTA permit

“The residence permit for EU/EFTA nationals is valid for five years. It is issued if the foreign national is in possession of an employment contract of at least twelve months’ duration or of unlimited duration”

The residence permit can be an indicator for tax residency - but the type of permit does not determine tax residency.

Romanian nationals aren’t going to get anything better than a B permit though, for permanent residence.

Having a B permit means your permanent resident and primary address is here in Switzerland. The difference is with a tourist visa or a limited time visa, where you know the date you are asked to leave. With a B permit, you can stay unlimited as long as you are employed or prove that you have the means to sustain yourself.

In most countries, you become a permanent resident by staying more than 6 months in a place. This would be the place where you are taxed.

Now you have property in Romania, so they will tax you on some income/wealth you make in Romania, which you also will have to declare in Switzerland, but get probably waived off once you prove you already paid taxes on this in Romania, but this will be told by the DTA.

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Of course they do, after 5 years you can get C permit.

Immigration status != tax status in any case (similar to professional investor has different meaning wrt tax vs brokers). Pretty sure most L and B permit holders are tax residents in Switzerland (there might be a tiny minority that aren’t due to having their center of life in a different country, e.g. only staying for work on weekdays).

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Correct.

I meant to say they aren’t going to get anything else for their first five years in Switzerland.
Somehow I didn’t write that though.

Thanks for pointing it out.

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