International taxation in real life

No, I’m not talking about the US taxing its citizens abroad for once, but it does start with a US citizen moving abroad: Janet.  In 2008, she did these things:

– she married me (legally) on December 22
– she taught music to a few children

Simple enough for taxation purposes, one would think.  But:

– although we would now file jointly, she had not yet moved in with me (in Basel, another canton, and therefore another tax jurisdiction), and according to deregistration and registration didn’t until January 1, 2009
– she taught music in Germany
– she taught in school facilities
– she was not employed by the school
– she did not pay rent to the school
– she was paid in Swiss francs by Swiss residents

So, the questions multiplied.  Would she have to tell Binningen about these earnings?  Should she have registered with the German authorities because she’d exercised a business in Germany?  Should she have registered in Switzerland?  Where would she have to pay her social security contributions?  Did she have to pay any at all, since in Switzerland she was now covered by my contributions?  And where would she have to pay?  The school she attended has headquarters in Aargau, so the Aargau social security system had written her that year for the minimum contribution the Swiss system expects of students, but she lived in Baselland, and was going to file taxes jointly with me in Basel-Stadt, working in Germany but getting paid in Switzerland, as a foreign resident.

Yeesh.  This would mean a lot of phone calls.

Here is what I remember and what I can make of my notes.

– The Aargau social security office said to call Basel-Stadt, they were responsible
– The Basel-Stadt social security office said to call Basel-Land, because she was a resident of Binningen (Basel-Land)
– The Basel-Land social security office said to call Germany for the social security taxation, and Binningen for all other taxes
– The city of Weil am Rhein (DE), where Janet taught, said she needn’t register (either because she was a musician or because she wasn’t making enough or both)
– The city of Lörrach (DE), responsible for German taxation in the Weil district, said she was taxable in Switzerland, because she didn’t have a contract with the school in Germany and because it was a short-term engagement
– Back at the Basel-Land social security office, they said that as soon as they had the documents they’d send a confirmation in German that Janet was in the clear, and they’d look around for an English form to send the US social security administration
– Binningen said that in principle Janet’s residency would require two tax declarations, despite getting married, but considering the amount Janet earned, decided not to send one, and said to call the Basel-Stadt tax office
– Basel-Stadt said that they’d settle it with Basel-Land upon receipt of our tax return, and said that someone with as low and irregular an income as Janet need not itemize deductions, but could simply deduct a flat 20% of income
– I later realized that a deduction married couples can make in Basel-Stadt if both are working was limited to the amount Janet earned (for low incomes like hers), so whether we itemized or deducted 20%, the end result was the same

What we did in the end was declare our income only in Basel-Stadt, and pay Janet’s social security (AHV) contributions only in Basel-Stadt, as far as I remember.  The take-home information for foreign independent musicians in Switzerland is to register for AHV early, and to check with all the involved tax and social security offices before accepting a gig.  (And you wonder why so many musicians fudge on taxes…)

3 thoughts on “International taxation in real life

  1. SursumCorda

    Now my head is spinning.

    I’m actually opposed, for a number of reasons, to the Flat Tax being touted by a number of people in the country, but I understand the urge to simplify. Making it easy to do the right thing is the first step toward keeping honest people honest.

  2. thduggie Post author

    Yeah, mine was spinning too. I think we did the right thing, albeit too late, and did the right thing again with Janet’s income from her gig in Strasbourg, but you never know. We certainly declared it all to the IRS, in case big brother is reading…

  3. IrishOboe

    I tried to figure out what the right thing to do was, but most of the musicians I asked said don’t report it and I either misunderstood what tax officials told me or they thought I didn’t earn enough to bother especially since I was here only temporarily, but then I got busy and got married and forgot about it all (or ignored it . . .) and dumped it on my poor husband, who can at least understand the language well! I think the moral is: make lots of money, or do things for free . . .


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