I wonder if anybody has been in a similar situation: We left Switzerland on 30th June, planning to relocate in UK where husband is retiring. Initially we wanted to remain tax residents in Switzerland while on holiday in France, but we were told we had to deregister from Switzerland straight away as our tenancy contract was expiring on 30 June: no accommodation, no residency! So we are now in France for 2 months staying with family (I am French), and planning to move to UK in September. I was told we have no need to register with French authorities if less than 3 months. We have not lived or been to the UK for more than 15 days/year in the past 20 years, so we should be able to benefit from the split year tax treatment in UK when we get there in September. But wondering if the UK would want to tax anything (dividends we get from Singapore, pillars 2/3 although these are already being taxed by Switzerland) prior to our arrival date in UK. Or would Switzerland want to tax our Singapore August dividends (they are already taxing our Pillars with a withholding tax) if they realise we are not yet UK residents? Holidaying between 2 tax residencies seems a bit of a grey area, so thank you for any advice!
I would in any case look at the double-taxation agreements between Switzerland/France, France/UK and UK/Switzerland. Most of these agreements are explicit about the criteria used to determine fiscal residence. The complexity here arises from having three countries (or four if one counts Singapore) rather than just two, and issues could arise if the agreements are incompatible with each other. In doubt, maybe a fiscal advisor with experience with these countries could help out, in particular to avoid, if possible, being taxed by several countries on the same assets.
[Disclaimer: this is not tax advice, just the sharing of experience]
Pillars 2 and 3 remain untaxed in Switzerland (on a personal “investor’s” level), as long as they aren’t cashed out.
Also, I’d tentatively think (assume) that the UK doesn’t tax pillar 2 (and probably 3 neither). AFAIK you aren’t eligible for a refund of Swiss withholding tax on cashing out your pension fund. So by applying the logic of non-double taxation (provided by DTA), if Switzerland does have a final tax on it, the UK shouldn’t.
Caveat: This is my own conjecture (though supported by “logic” and hearsay). Also, I’m regularly seeing UK citizens have made larger non-mandatory contribution to their pension fund - can’t believe they’re doing it for no reason.
Can’t see anything of a grey area.
You don’t have a residence in Switzerland anymore, so you deregistered. You take up residence in the UK when you move there - though you don’t register (as there’s no registration).
I’d also assume that the double taxation treaty, if anything, will provide a rule on how the times of your tax residency will be “split up” between the two countries.
AFAIK for many countries, you usually can get it refunded after showing that you properly declared it in your new country of residence (that withholding tax was put in place to reduce tax evasion).
On that topic, I’ve always found it odd those “no tax residency anywhere” argument. I really wonder how it would play out in an audit with big bucks involved.
But I understand that practically unless you declare it, UK would be unlikely to know about the pension withdrawal, at least given the current of cross border data sharing – I don’t think that’s in scope for the CRS protocol.
Personally for large pillars amount, I’d probably get a few months of residency in Malta or somewhere with low/no tax on foreign income before moving to the final destination.
Btw just in case, if you have appreciated shares, it’s a good idea to sell/re-buy them (afaik UK has capital tax gain, while CH doesn’t).
Many - though (in most cases) not the UK, as far as I know.
“Mit Ländern wie (…) Grossbritannien(…) hat die Schweiz sehr wohl ein Doppelbesteuerungsabkommen unterzeichnet – und doch können Auslandschweizer die in Abzug gebrachte Quellensteuer auf ihren Pensionskassenvermögen nicht zurückfordern. Im Steuerjargon heisst das, dass im betreffenden Abkommen das Besteuerungsrecht der Schweiz zugewiesen wird.”
5-10% as a one-off tax doesn’t seem that bad to me, to be honest.
That depend which country you move to though (if you declare it to your new country of residence).
Thank you for your suggestion. Our case is indeed quite complex with all the countries involved, and I will try and check the double taxation agreements, and possibly a fiscal advisor when we finally arrive in the UK.
Thank you for this interesting discussion and all the answers and suggestions from all. My husband’s pillar 2 which he will get as a lump sum a month after official retirement date, with about 9% deducted by Swiss government as I understand, is not that big after only two years in Switzerland, but we would like to avoid a double-taxation on it, if taxed in the UK as it might be. From what I read, the Swiss withholding tax might indeed be problematic to get refunded…This is why we hope to have the UK split year and UK tax residency starting after the PIllar 2 lump sum is paid out to my husband!
Thank you San - Francisco. My husband’s pillar 2 and 3 are being taxed with the Swiss withholding tax as he is retiring and cashing everything out (we also want to buy a house in UK hence the cashing out).
As you don’t see a grey area with our holiday in France in July and August, and think that we just take up residency in the UK when we move there in September (indeed the gov.uk website’s statutory residency tests seem to confirm this), where do you think we should pay taxes on dividends which we will receive in July and August (as we have indeed already deregistered from Switzerland, and they told me to do our final tax return based on 30 June values)? Thank you again for explaining.
…although crucially (and as ProvidentRetriever and I have already said), you might still be treated as UK residents for tax purposes.
Companies and tax authorities don’t “like” the idea of having tax residency. And it’s clear why: Otherwise, someone could go on a one-month holiday, and arrange to receive large income or realise capital gains (taxable in many countries) during this one month period of (literally) tax holiday “without a residency”. And laws have been made accordingly.
In your case, I’m obviously not qualified enough to provide a professional, comprehensive answer (otherwise, I should charge for that). I would consult the double taxation agreement between Switzerland and the UK. Depending on your circumstances, I might interpret it and argue along these lines:
You’ve deregistered from Switzerland, they’ve told you to file your tax return with a cut-off date of 30 June. Your deregistration from the municipality and end of the rental agreement is strong indicator of giving up residency on this date. They are unlikely to bother you looking forward, unless you’ll be staying or returning to the country.
France isn’t going to care about you, since you don’t plan to take up residency there. It’s only a temporary, short-term holiday. And they wouldn’t be able to tax you for lack of indicators of you taking up residency there.
Now with regards to the UK, I’m less sure, if and when you’ll be treated as residents for tax purposes. However, they will obviously want to tax you for the remainder of the year, after you’ve taken up residency after the holidays. Also, have a two-month interim period with “no residency” might “look wrong” in the eyes of the tax authority. On the other hand, I can in no way imagine that the British tax authority will complain about you registering with them and paying taxes “early” for a couple of weeks of that “grey area”.
Having had a look at the DTA (linked above), it does (see article 4, residency) provide for multiple criteria and fallback criteria. Given that…
- you have effectively cut off ties with Switzerland for good
- your husband intends to retire (i.e. indefinitely remain) in the UK
- you might already have bought/rented a “home” in the UK (or at least have lined that up, though you’ve only stated you are “planning to move” above)
- your husband might be a British national
…I would assume you should be taxed in the UK, if anywhere.
And that’s what I’d consider, personally:
- consult a tax professional (if I weren’t such a cheapskate)
- keep documentation regarding your movements (leaving Switzerland, end of rental contract, new contract for home in the UK)
- straight up ask the UK tax office about the date from which they’d consider you for split year tax treatment, by providing the truthful facts: You’ve left Switzerland at date X (from which they won’t consider you as resident anymore), went on a short-term holiday at your family in FR, and then moved to the UK
- possibly just pay UK taxes for July and August, for peace of mind (unless, of course, there’s a big incentive, i.e. tax savings not having to do so, while keeping everything legal), especially if that costs less than paying for qualified professional advice. I can’t imagine anyone will complain.
A big thank you, San_Francisco, for taking the time to answer in so much details, with useful link to the article 4, residency. My husband is indeed British, although I am French, which might have an effect…We have not bought or rented anything in the UK yet but, as you suggest, we will ask the UK tax office what will be our split year deemed arrival date as soon as we get there and sign a rental agreement. We will give them all our dates to avoid any problem in the future when we do our tax return. Thanks again!