A Swiss annuity simply refers to a fixed or variable

annuity In investment, an annuity is a series of payments made at equal intervals.Kellison, Stephen G. (1970). ''The Theory of Interest''. Homewood, Illinois: Richard D. Irwin, Inc. p. 45 Examples of annuities are regular deposits to a savings account, mo ...

marketed from

Switzerland ). Swiss law does not designate a ''capital'' as such, but the federal parliament and government are installed in Bern, while other federal institutions, such as the federal courts, are in other cities (Bellinzona, Lausanne, Luzern, Neuchâtel ...

or issued by a Swiss based life insurance company but has no legal definition. Insurance brokers promoting annuity contracts issued by insurance companies domiciled in jurisdictions outside of Switzerland, such as

Liechtenstein Liechtenstein (), officially the Principality of Liechtenstein (german: link=no, Fürstentum Liechtenstein), is a German-speaking microstate located in the Alps between Austria and Switzerland. Liechtenstein is a semi-constitutional monarchy ...

, also market such contracts as Swiss annuities. The hallmarks of a Swiss annuity generally include the ability to invest in multiple currencies, the custody of assets within Switzerland, and the flexibility of withdrawals. Often touted benefits of a Swiss annuity include the safety of Switzerland plus some degree of asset protection.

U.S. Tax Considerations

For U.S. taxpayers owning a fixed annuity issued by a non-U.S. insurance company, including a Swiss annuity, the interest credited within the policy is subject to U.S. income tax on an annual basis under the

original issue discount Original Issue Discount (OID) is a type of interest that is not payable as it accrues. OID is normally created when a debt, usually a bond, is issued at a discount. In effect, selling a bond at a discount converts stated principal into a return on ...

rules. Variable annuities issued by non-U.S. insurance companies may permit

tax deferral Tax deferral refers to instances where a taxpayer can delay paying taxes to some future period. In theory, the net taxes paid should be the same. Taxes can sometimes be deferred indefinitely, or may be taxed at a lower rate in the future, particular ...

in the same manner as an annuity issued by a U.S. domestic insurance company presuming the diversification requirements and investor control limitations of the Code and as articulated by the

IRS The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax ...

are respected. A Swiss annuity is considered a foreign financial account and reportable to the U.S. Department of Treasury each year by filing Form TD F 90-22.1 (the " FBAR"). Further, a Swiss annuity generally is considered a specified foreign financial asset, which must be reported annually using IRS Form 8938 assuming the value is above certain thresholds. It is unclear whether U.S. taxpayers can exchange an existing domestically issued life insurance policy or annuity contract for a Swiss annuity on a tax deferred basis as a result of the ambiguity of the wording of Section 1035(c) of the Internal Revenue Code of 1986, as amended. The U.S. Treasury Department and IRS have not issued regulations applying what was meant by Section 1035(c), which provides "To the extent provided in regulations, subsection (a) shall not apply to any exchange having the effect of transferring property to any person other than a United States person." Swiss annuities are not subject to the one percent excise tax commonly imposed on purchases of foreign life insurance or annuity policies due to the double tax treaty signed by the U.S. and Switzerland.https://www.irs.gov/pub/irs-trty/swiss.pdf

Regulations

The Swiss Federal Office of Private Insurance oversees the Swiss insurance industry through the enforcement of rules and regulations. Swiss life insurance companies are required to cover their financial obligations and maintain an extra margin of security that is kept separate from the other assets of the company.

References

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External links

Website of the Swiss Financial Market Supervisory Authority
Insurance Contract law Finance in Switzerland Annuities