(Editor’s note: The United States is the only country in the Developed World that requires citizens living outside the country to file a tax return. For Americans living in the U.S., the deadline to file federal taxes 18 April, but expats have until 15 June to file without penalty. Dispatches does not receive remuneration from Americans Overseas tax consultants.)
The United States has made investing in the stock market outside the U.S. extremely complex. Banks abroad are denying U.S. citizens investment services for fear of a penalty due to FATCA. The Foreign Account Tax Compliance Act (FATCA) generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments.
Buying individual stocks might be possible whereas buying funds outside the U.S. poses a big problem. The U.S. also imposes a non-creditable taxation on some investment products abroad.
The U.S. further requires that you report all financial interest you have in the U.S. or abroad (FBAR). The regulations on reporting these investments are complex. Therefore, we advise you to have these investments screened by a tax advisor specializing in filing for U.S. citizens abroad.
Americans Overseas can provide you with names of professionals if desired.
Why Americans should never own shares in a non-U.S. mutual fund (PFIC)
A PFIC (Passive Foreign Investment Company) is simply a “pooled investment” registered outside of the United States encompassing mutual funds, exchange-traded funds (EFTs), closed-end funds, hedge funds, insurance products and non-U.S. pension plans. Having so-called PFICs results in punitive tax. FATCA makes it nearly impossible for the IRS to not tax them. Do you have PFICs? Or are you unsure?
Be well informed, contact Americans Overseas for an affordable financial service adapted to your wishes, investment and knowledge. Avoid this punitive tax.
For people with an American nationality, it can be good to find out what options there are to save for retirement income. For example, there are IRAs (Individual Retirement Account) and Roth IRAs. These savings options can be very interesting from a tax perspective.
When are you considered a U.S. citizen (and taxable)?
You can be considered a U.S. person for tax purposes by many different tests.
- U.S. Citizen: Born in the United States or the individual has been naturalized as a U.S. citizen.
- U.S. Citizen: Born outside the United States if one or both of your parents are U.S. citizens.
- Substantial presence test: Based on the number of days you are in the U.S. over a three-year period.
- The ‘green card’ test: You’ve been granted the right to lawful permanent residence in the U.S. If you have left the U.S. but still have an active Green card you might need to file.
About Americans Overseas:
Americans Overseas offers a large independent network of U.S. tax accountants and financial planners, specialized for Americans living abroad. Based on your personal situation, we provide information and introduce you to the appropriate expert in our Americans Overseas network free of charge and free of any obligation. Learn more and listen to the podcasts of Americans Overseas here.