Strategic Wealth Planning for Americans Living in Portugal
Specialized investment managemnt solutions for Americans.
Optimize US pensions when resident in Portugal.
Get simplified US reporting and avoid double taxation.
Introduction
If you’re an American expat or U.S.-connected person (such as a Green Card holder or U.S. resident living abroad), you face the unique challenge of dual tax residency for life. This status can severely limit your access to tax-efficient financial structures available in the European market, because many providers are wary of the additional reporting and taxation obligations.
Managing U.S. retirement plans abroad
Managing your 401(k), IRA, or other U.S. retirement accounts can be complicated when living overseas. If you’re a U.S. citizen who worked in the States before moving abroad, or if you’re a foreign national who spent time working in the U.S., you most likely have a company-sponsored 401(k), IRA, or another retirement savings plan.
For those with existing IRAs, it’s possible to roll them into equivalent, SEC-regulated accounts that are easy to manage and protect your income from double taxation.
Tax-efficient brokerage accounts
At Ingenium Financial, we specialize in finding investments that are not classified as Passive Foreign Investment Companies (PFICs) and are tax-efficient for U.S. taxpayers. Working with a knowledgeable financial advisor who understands PFICs and U.S. tax obligations can significantly enhance your retirement and investment strategy.
U.S.-complient solutions include model portfolio services available in USD/EUR/GBP. They are subject to various minimum amounts depending on the chosen strategy. Regular monitoring and review of your financial plan is a value-added service from Ingenium Financial. Industry-leading IT systems provide you with up-to-date reporting so that you can stay informed on progress at all times.
Why you should avoid PFIC investments
PFICs, or Passive Foreign Investment Companies, are pooled investments registered outside the U.S., such as foreign mutual funds, ETFs, money-market funds, hedge funds, and non-U.S. insurance products. The IRS typically classifies almost any foreign investment product, aside from direct ownership of stocks and bonds, as a PFIC.
PFICs are taxed at the highest rates, making it crucial to identify and avoid them. Excess distributions from a PFICs can lead to punitive taxation, with rates potentially exceeding 50% due to the complex rules on PFIC income recognition. The burden of compliance is on the taxpayer, who must file separate forms for each PFIC annually. The information provided by foreign investment firms rarely meets PFIC reporting requirements, leading to additional time and expense.
We offer US-compliant IRA-protected solutions and US tax-optimized model portfolio services
A full tax pack is produced on a complementary basis as part of these solutions.
Understanding FATCA
The Foreign Account Tax Compliance Act (FATCA), enacted in 2010, targets non-compliance by U.S. taxpayers with foreign accounts. It requires foreign financial institutions and certain non-financial foreign entities to report on the foreign assets held by U.S. account holders or face withholding taxes on relevant payments. FATCA also mandates that U.S. persons report their foreign financial accounts and assets if they exceed certain thresholds.
Due to FATCA, the IRS is much more likely to identify unreported PFICs, making it essential for U.S. expats to understand how PFICs impact their tax filings. Ingenium Financial can help you develop an IRS-compliant, tax-efficient investment strategy. We also ensure timely generation of the necessary tax documentation for your local country tax filing.
What needs to be reported under FATCA
Under FATCA, U.S. citizens must report foreign account holdings annually. These include:
- Foreign pensions
- Foreign stock holdings
- Foreign partnership interests
- Foreign financial accounts
- Foreign mutual funds
- Foreign-issued life insurance
- Foreign hedge funds
- Foreign real estate held through a foreign entity (Note: while real estate itself doesn’t need to be reported, the foreign entity holding it does, including the real estate’s value.)