Switzerland and US tac treaty J-1 researcher

[gracefulcrayfish]

I am a citizen of Belgium, but I was living and working in Switzerland before I came to the US as a postdoctoral researcher on a J-1 visum. There seems to be a tax treaty between Switzerland and the US (https://www.irs.gov/pub/irs-trty/swiss.pdf), and article 20 specifically mentions "Students and Trainees" in very similar wordings to other tax treaties. However, Sprintax does not automatically offer the option of claiming this treaty's benefit. Is there any chance that I can claim the benefits of this treaty or am I missing something?

[DaveF1006]

To clarify, when did you enter the US and have you stayed her fulltime from your entry date into the country?

[gracefulcrayfish]

Dear Dave

I entered the US in 2023 and stayed here full time, yes. Perhaps the reason I am not eligible is because I am a J-1 research scholar and not a student?

[AmyC]

As a J-1 VISA holder, you are exempt from counting days for the purposes of the 183-day residency formula for five calendar years if you are a student or two calendar years if you are a research scholar or teacher.

If you are a J-1 research scholar from Switzerland in the United States, there are specific tax implications and treaty benefits that you should be aware of. Here’s a general overview:

Tax Status
1. Non-Resident Alien: As a J-1 research scholar, you are typically considered a non-resident alien for tax purposes if you have been in the U.S. for less than 183 days during the current year and the two preceding years.

2. Tax Filing Requirements Non-resident aliens must file Form 1040-NR (U.S. Nonresident Alien Income Tax Return) if they have U.S.-source income.

U.S.-Switzerland Tax Treaty
Switzerland and the United States have a tax treaty that may provide certain benefits to J-1 research scholars. 

Here are some key points:

1. Exemption from U.S. Tax on Certain Income: Under the treaty, certain types of income may be exempt from U.S. taxation. For example, if you receive a stipend or grant for research, it may be exempt from U.S. taxes for a limited period.

2. Duration of Exemption: The exemption typically applies for a limited duration (e.g., up to two years) and may depend on the specific terms of the treaty.

3. Claiming Treaty Benefits: To claim any treaty benefits, you must complete Form 8833 (Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)) and attach it to your Form 1040-NR.

References:

US Taxes Explained for J-1 Research Scholars / Professors

Taxation of alien individuals by immigration status – J-1

[LightningBolt]

Hello, 

I wonder how your situation was solved as I am in a similar situation as the one you described:

Portuguese citizen, resident in switzerland on a B-permit, moving to the US for 2 years on a J1 on a EU-funded postdoctoral fellowship (MSCA). During the fellowship my contract and income will be through an Italian institution.  I am moving directly from Switzerland to the US, and after the US phase to Italy. 

As I understand, during the US phase, I will be a

- non-resident allien in the US

- a non-resident but potentially taxable in Italy

- my swiss residency may cease.

I wonder if I can claim a tax treaty to avoid double taxation in the US, and if so, which one?

From my understanding the Swiss-US tax treaty could cover me even if I lose swiss residency, as it mentions:"Payments which a student, apprentice, or business trainee, who is or was immediately before visiting a Contracting State a resident of the other Contracting State, and who is present in the first-mentioned State for the purpose of his full-time education or training, receives for the purpose of his maintenance, education or training shall not be taxed in that State provided that such payments arise from sources outside that State"

On the other hand, I am unsure whether the Italy-US tax treaty could be evoked. Although there is a clause for researchers and professors, from my understanding, it is only valid for people who are considered residents in either one or both countries.

Would highly appreciate any help!!

Best,
Guilherme Almeida

[gracefulcrayfish]

Hi Guilherme

First, congratulations on getting the MSCA, it is very competitive!

I see you are also in quite a complicated tax situation. Based on my experience (but I am not a tax expert or anything), I'll give my best guess. You should be able to invoke the US-Swiss tax treaty because you, like me, had a residency in Switzerland prior to moving to the US. However, this tax treaty is useless in our case because, unlike treaties that have been (re-)negociated more recently (like the Swiss-Belgian one), it only exempts students (e.g. F-students), but not researchers/trainees (J-1). Hence, you will have to pay taxes on your US-linked income.

It seems like income from grants like MSCA is taxable in the US, so you'll have to dig into the US-Italian tax treaty to find out who it applies to. If it only applies to people who used to be residents of Italy before moving to the US, you may be out of luck.

Regarding your Swiss residency, I think you indeed need to deregister and give up your B-permit if you leave Switzerland and move to the US.

A small silver lining: if you stay in the US for more than two years on a J-visa, you will be taxed as a resident. If you have neglible foreign income, your tax burden will likely be lower because residents can claim the standard deduction.