If you pay premiums to a Swiss insurer for life, disability, accident or annuity coverage, US federal excise tax normally applies at 1 cent per dollar under Internal Revenue Code Section 4371(2). Casualty policies, personal liability (Privathaftpflicht), household (Hausrat) and similar cover, carry a 4-cent-per-dollar rate under Section 4371(1). The US-Swiss tax treaty can reduce this to zero in many cases, but only if the insurer has a closing agreement with the IRS and you know that before you file. It is reported quarterly on Form 720, and the first administrative hurdle is an EIN, not your Social Security number.
What exactly is taxed
The rules come from 26 USC §4371 and the related regulations at 26 CFR §46.4371-2. Life, sickness, accident and annuity premiums are taxable when the policy is issued by a foreign insurer with respect to the life or hazards of a US citizen or resident. Casualty premiums are taxable when the policy is issued to a US resident against US risks. A narrow exception exists if the policy is signed or countersigned by an officer or agent in a US state, but that is uncommon for policies written through Swiss channels. For the everyday policies many people buy in Switzerland, personal liability and household cover, see our separate walkthrough of Privathaftpflicht, Hausrat & Legal Protection.
- Life, sickness, accident and annuity premiums (IRC §4371(2))
- 1 cent per dollar (1%)
- Casualty insurance and indemnity bonds (IRC §4371(1))
- 4 cents per dollar (4%)
- Reinsurance (IRC §4371(3))
- 1%, effectively out of scope after Rev. Rul. 2016-03
Who is on the hook
The person paying the premium is primarily liable, but liability is joint and several: anyone who makes, signs, issues, sells or benefits from the policy can be pulled in. The tax attaches when the premium payment is transferred to the foreign insurer or broker. In practice, if you pay the premium from your own account, that is usually the clearest starting point.
How the US-Swiss tax treaty changes the answer
Under Article 2(2)(b) of the US-Switzerland income tax treaty, the excise tax is a covered tax only to the extent that the risks are not reinsured with a person not entitled to treaty benefits. The IRS lists Switzerland among the treaty countries, so the practical question is not whether a treaty exists, but whether the specific insurer has taken the additional step of a Rev. Proc. 2003-78 closing agreement. From your side, you may treat a premium as exempt only if you have knowledge, before filing, that a closing agreement was in effect. These moving parts are part of the broader picture covered in The Hidden US Tax Traps in Swiss Insurance Policies for Americans.
Treaty exemption is not automatic
You cannot simply assume the treaty zeroes out the tax. Before relying on the exemption, ask the insurer whether a Rev. Proc. 2003-78 closing agreement with the IRS is in effect for the specific policy or premium year.
Form 720: the quarterly mechanics
The tax is reported on Form 720, Quarterly Federal Excise Tax Return, using IRS No. 30. The filing mechanics are the same as for health coverage, but the substance here covers life, disability, accident and casualty policies. A critical administrative point: Form 720 requires an Employer Identification Number (EIN), not your Social Security number. If you have never needed an EIN as a US individual abroad, this is often the first step.
The practical question to ask your insurer
- Does this policy or your company currently have a Rev. Proc. 2003-78 closing agreement with the IRS?
- Is any part of this risk reinsured with a person not entitled to benefits under the US-Switzerland tax treaty?
- Will the premium payment be transferred to a foreign insurer or foreign broker, and on what date?
If the answer to the closing-agreement question is no or unclear, you should assume the 1% or 4% rate applies until confirmed otherwise. If you are also comparing life insurance structures, the excise tax is only one variable; see Term Life vs. Swiss Cash-Value Life Insurance.
Educational information only
This is an overview, not individual tax advice. Whether a specific Swiss life, disability, accident or casualty policy triggers the tax, and how the treaty applies, depends on your situation and the insurer's status. Get personal advice before filing Form 720.