While more than 8 million American citizens are currently enjoying life abroad, one of the significant obstacles faced by US expats living in Europe is the stringent reporting restrictions imposed by the Internal Revenue Service (IRS). Introduced in 2010, these restrictions have had far-reaching implications, making it increasingly difficult for US expats to access banking and financial services, as well as facing limitations with their investment and retirement accounts. This article explores the impact of the Foreign Account Tax Compliance Act (FATCA) and sheds light on the growing issues faced by US citizens residing in Europe.
Restrictions imposed on US expats living in Europe
The introduction of the Foreign Account Tax Compliance Act (FATCA) in 2010 aimed to prevent US citizens from hiding money offshore to evade taxation. However, its implementation has inadvertently created challenges for Americans who have chosen to live abroad. Under FATCA, US citizens are now required to report their foreign account holdings to the IRS, leading to a complex and time-consuming process.
Moreover, FATCA imposes significant penalties on foreign banks that fail to disclose any accounts connected to the United States. As a result, many banks and financial institutions have opted to turn away US clients rather than deal with the additional workload and potential non-compliance penalties. This, in turn, has made it increasingly difficult for US expats in Europe to find banking and financial advice services.
Restrictions on investment and retirement accounts
The problems for US expats extend beyond banking services and to their investment and retirement accounts. Many US-based investment providers are restricting or even closing accounts held by US expats. The primary reason for this is the regulatory costs associated with serving clients outside the United States. Consequently, US expats face hurdles when it comes to managing their investments and securing their retirement funds.
Luke Staden, International Financial adviser who specializes in this area states that ‘If you have a US retirement scheme which takes action against you, in a best case scenario you will be restricted from trading. In the worst case scenario you will be asked to find a new retirement account custodian or have your account closed altogether which can have overwhelming tax and early access penalties. I think it's important for all US expats to get advice on how to protect themselves from a worst-case scenario.'
The reporting restrictions introduced by the IRS have created a challenging environment for US expats living in Europe. By understanding the implications of FATCA and seeking expert guidance, however, US expats can take proactive measures to safeguard their financial interests and avoid potential penalties. As the landscape of international financial regulations continues to evolve, staying informed and seeking professional advice becomes increasingly vital for US citizens living abroad.
How can we help?
Here at Blacktower we are regulated across Europe and the US and have a physical presence in most countries including Portugal, Spain, France, and the UK. We have a host of advisers whose local knowledge and experience are invaluable in complex scenarios like these, giving them the relevant expertise to assess your investment and retirement account options to ensure you are pursuing an efficient and compliant course of action.
You can arrange a complimentary consultation to discuss your investment and financial planning options as a US citizen with us.
Do you want to invest as a US expat but are facing difficulties? Have you had your US investments and retirement accounts restricted or closed?
Join our webinar with Luke Staden, International adviser, on Thursday 25th May at 6pm BST/7pm CEST to find out how you overcome these problems and make the most of your money.
