If you are an American expat living in Europe, you might be wondering how you can invest your funds while being certain that your investment won’t have additional taxes or reporting. In this article, I will explain why it is more difficult to invest and grow your funds for Americans living in Europe.
Rules and Regulations restricting American expats
As I wrote in a previous article related to American Expats living in the UK, there are different sets of rules that only apply to American expats. The IRS in the U.S. makes it difficult for investment firms in Europe to want to work with American clients.
This is due to a few regulations like FATCA and PFIC reporting. By adding more rules and regulations, it makes it almost impossible for American expats to save and grow their funds.
Choose a firm that wants to work with you
The first thing is to find a firm that wants to work with American expats. Some Private Banks will allow the U.S. connected to invest with them but they will require 1 million or more to invest with them while some of them might require 5 million.
Some of the firms working with American expats will require their clients to provide an address in the U.S. so they can satisfy the brokerage custodian firm requirements. This can be a short-term solution but there is a long-term solution that doesn’t require you to provide your parent’s address so you can keep investing your funds.
IRS-compliant investment solution?
At Harrison Brook, we offer investment solutions for American expats living in Europe or for this matter almost anywhere in the world. Our solution is called a Global Investment Account.
This allows you to invest your cash directly as an American expat inside an investment platform that is IRS tax compliant. That means that each year your will receive a 1099 form that you will use when doing your taxes in the U.S.
As you probably know, U.S.-connected individuals have to file taxes with the IRS every year even if they don’t have the income to report.
This GIA or Global Investment account has great benefits:
- Multi-currency account (USD, GBP, EURO)
- IRS tax compliant (1099 form)
- No exit fees
- Access to discretionary fund managers
- Fully U.S. and European compliant
- Fee-based model unlike the majority of expat financial advisor using a commission
- No contribution limits
- Portable solution if you move to another country
Non-qualified Investment
As I mentioned before in this article, the Global Investment Account is a solution for direct investments. That means that it is a non-qualified investment and can not be comingled with retirement funds. Most American expats already have retirement accounts with a U.S. custodian or firm.
This GIA is designed for the direct investment of cash inside a taxable investment account. Since you don’t have tax-deferral, you will need to report any income when filing your taxes in the U.S. This is why you have to find the right solution that meets your needs.
This part of your financial plan is really important because while living overseas you might not have access to a local retirement fund and you will have only small possible IRA contributions.
With inflation between 6-10% in Europe this year, it is important to have your money work for you instead of staying in a cash position that is not growing at all.
In conclusion
As an American expat myself I understand the challenges you are facing when trying to find investment solutions overseas. I know how hard it is to find a financial institution that wants to work with you while living abroad. Since I worked as a Financial Advisor for one of the Largest American Broker dealers for many years, I saw American expats accounts being closed because of a foreign residency.
At Harrison Brook, we want to serve the American expat community well and will find the right solution that corresponds to your specific needs. If you are an American expat living in Europe or abroad and you want to know more about the Global Investment Account, don’t hesitate to get in touch.
