Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

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MickMal
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Joined: Wed Mar 13, 2019 12:52 pm

Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by MickMal » Fri Apr 26, 2019 11:54 am

My wife and I are in our mid 40's and planning to retire in approximately 15-17 years to Ireland where she is from. Both of us are dual American and Irish citizens and while it is still some time away, we are reviewing our retirement plan to figure out projected income and after researching online have even more questions relating to taxes. Before relocating to Ireland, we are planning to sell our home in the US, buy a place with cash and will not be working for money (hopefully volunteering for something worthwhile). Also, we plan to leave our investments in the US accounts and draw down on a monthly basis.

We would appreciate any advice or referral.

sonosoldi3112
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by sonosoldi3112 » Fri Apr 26, 2019 5:35 pm

Hello

You may have thought of this but you need to be sure your brokerage account will not be closed when you move ... so what I would do is look at Charles International Account .... . if you do not have a USA Schwab account I would open one and transfer my assets thereto. It seems only Interactive Brokers and Schwab allow accounts with your Ireland address ... with Schwab you have all the benefits except you cannot buy new mutual funds or new shares in those funds you already own ..but you can spend them down ..live off dividends ect .... if you move to Ireland you cannot open Schwab International account but if you have an existing account ..you are grand fathered in. ... you of course have no restraints as regards etf's , banking, debit cards ect ..which is great.

Ireland Private Health insurance very reasonably priced and I would sign up immediately as there is a rating system whereby it costs more the longer you wait from time of first arrival ... you will have no surcharge .. no matter your age or
conditions.
https://www.totalhealthcover.ie/

Slainte!

DJN
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by DJN » Sat Apr 27, 2019 1:09 am

Hi,
this is definitely not my area of knowledge, but for a start I would have a read of this section of Wiki: https://www.bogleheads.org/wiki/Taxatio ... ing_abroad
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.

Topic Author
MickMal
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by MickMal » Sat Apr 27, 2019 8:55 am

Thanks - I appreciate the replies!

QuantOfAsia
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by QuantOfAsia » Sun Apr 28, 2019 7:14 pm

The US-Ireland tax treaty will probably play a big role in your tax planning: https://www.irs.gov/businesses/internat ... -documents

Many European funds that invest in the US are domiciled in Ireland, in part because of its favorable corporate / fund taxation and strong treaty with the US.

I've had an Interactive Brokers account for almost 20 years, about half that time living outside the US, and have seen them as the most friendly US broker to Americans overseas. That said, I still have Vanguard and Schwab accounts as well.

DJN
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by DJN » Sun Apr 28, 2019 8:50 pm

Hi,
another section of Wiki might be useful to read: https://www.bogleheads.org/wiki/Investing_from_Ireland but if you retain your US tax status, the sections on US tax are your most important areas for study.
DJN
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.

Valuethinker
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by Valuethinker » Mon Apr 29, 2019 2:47 am

MickMal wrote:
Fri Apr 26, 2019 11:54 am
My wife and I are in our mid 40's and planning to retire in approximately 15-17 years to Ireland where she is from. Both of us are dual American and Irish citizens and while it is still some time away, we are reviewing our retirement plan to figure out projected income and after researching online have even more questions relating to taxes. Before relocating to Ireland, we are planning to sell our home in the US, buy a place with cash and will not be working for money (hopefully volunteering for something worthwhile). Also, we plan to leave our investments in the US accounts and draw down on a monthly basis.

We would appreciate any advice or referral.
Because of PFIC rules US citizens must hold funds that are not US-domiciled.

However EU PIRR (?)/ Mifid II rules mean that European brokers basically cannot sell you American funds or ETFs (because the key required information is not available for those funds).

So you can be stuck unable to buy US funds, but from a tax point of view needing to buy US funds or ETFs.

That means you have to keep your US investing accounts open. By hook or by crook. OR find a non EU financial services jurisdiction where the rules don't apply and open an account there.

Given the time lines, that might be the UK (which will presumably have Brexited by then). Other solutions might emerge. It's hard to know.

But the situation for a US citizen living in Europe right now is dire, unless they managed to keep their US accounts open (I would have at least 2 per person, with different institutions, in case one does get closed on you).

Topic Author
MickMal
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by MickMal » Mon Apr 29, 2019 8:53 am

Thanks for the reply. They don’t make this easy and we will continue saving/investing and keep an eye out for any changes in the tax laws over the next decade.

Valuethinker
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by Valuethinker » Mon Apr 29, 2019 9:23 am

MickMal wrote:
Mon Apr 29, 2019 8:53 am
Thanks for the reply. They don’t make this easy and we will continue saving/investing and keep an eye out for any changes in the tax laws over the next decade.
Irish tax law, interestingly enough, is brutal to Irish residents holding Irish-domiciled funds - as I understand the position. Go figure. Ireland is not a nice place for taxation of investments from all I can gather. I sense that a protected insurance industry quite likes its high fee stockade ...

The problem is not really tax law (well, Irish tax law maybe). The problem is MIFID II & its retail companion (PIIR?) - EU financial services regulation regarding funds. To protect EU citizens, they basically are restricting the ability of EU firms to sell certain kinds of products that are unregulated.

(there is an opt out category. I am going to say "accredited investor". But that's not the term. If you can show your adviser that you have more than a certain amount of assets, and habitually invest in unorthodox investments like venture capital etc., (or that you are a professional like a lawyer or banker working in that field) then you can bypass the consumer protection rules).

(It may be that if you go through Jersey/ Guernsey/ Isle of Man/ Switzerland/ BVI etc. you can get round these rules. Not sure to what extent they are equivalent or "super equivalent" (the basis of UK financial services regulation) to EU rules.)

Unless there is some kind of reciprocity on financial services with the USA - which would require a more general trade treaty, I imagine, and which is unlikely in the current climate -- I don't see this getting fixed anytime soon. There's no political mileage in it (how many expat Americans are there and how many armored divisions do they have? *).

Perhaps at some point there will be a general ironing out. Always worth letting your representatives in Washington know of your concerns (in my day, one sent a letter in the post, apparently post anthrax scare** this just slows it down - but I would still send a letter because in the age of "clicktivism" I think it shows effort and intent) as well as the heads of the relevant financial services committees.


* sorry. It's what Stalin said of the Pope. I mean of course (adopts Bill Murray's voice in Ghostbusters) "to save the lives of millions of ... registered voters".

** people died so it wasn't just a scare. Just not the people it was intended for but those invisibles of office life who sort and deliver your mail.

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Tourne
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by Tourne » Mon Apr 29, 2019 3:07 pm

Valuethinker wrote:
Mon Apr 29, 2019 2:47 am

Because of PFIC rules US citizens must hold funds that are not US-domiciled.

However EU PIRR (?)/ Mifid II rules mean that European brokers basically cannot sell you American funds or ETFs (because the key required information is not available for those funds).

So you can be stuck unable to buy US funds, but from a tax point of view needing to buy US funds or ETFs.

That means you have to keep your US investing accounts open. By hook or by crook. OR find a non EU financial services jurisdiction where the rules don't apply and open an account there.

Given the time lines, that might be the UK (which will presumably have Brexited by then). Other solutions might emerge. It's hard to know.

But the situation for a US citizen living in Europe right now is dire, unless they managed to keep their US accounts open (I would have at least 2 per person, with different institutions, in case one does get closed on you).
If I understand correctly, PFIC rules do not apply to ETFs, only to mutual funds. So an American living abroad can invest only in ETFs (or individual stocks) in the US. That having been said, most US brokerages won’t deal with American expats, as there are extra compliance/verification procedures to open the account, and there aren’t enough US expats to make it worth their while.

When I opened my Charles Schwab International account, they transferred over my mutual funds, but said I could only hold or sell those funds gong forward. Any new purchases have to be ETFs. Automatic dividend reinvestments on the mutual funds seem to be ok.

I agree with your wider point about US citizens in Europe. While most US banks and brokerages won’t deal with US expats, many European banks won’t deal with them either because of FACTA reporting requirements. So while they may give you a checking account and a basic savings account (although some won’t even do that), anything beyond that is off limits because they don’t want the hassle.
Last edited by Tourne on Mon Apr 29, 2019 3:23 pm, edited 1 time in total.
Plans are nothing; planning is everything - Dwight D. Eisenhower

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Tourne
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by Tourne » Mon Apr 29, 2019 3:20 pm

MickMal wrote:
Fri Apr 26, 2019 11:54 am
My wife and I are in our mid 40's and planning to retire in approximately 15-17 years to Ireland where she is from. Both of us are dual American and Irish citizens and while it is still some time away, we are reviewing our retirement plan to figure out projected income and after researching online have even more questions relating to taxes. Before relocating to Ireland, we are planning to sell our home in the US, buy a place with cash and will not be working for money (hopefully volunteering for something worthwhile). Also, we plan to leave our investments in the US accounts and draw down on a monthly basis.

We would appreciate any advice or referral.
A few other things you might want to keep in mind:

1) Double taxation treaties often are much more favorable to earned income than they are to unearned income. Which, I am assuming, is going to be most of your income in retirement. It is worth having a solid read through the US-Ireland double taxation treaty before making any final decisions.

2) I agree with Valuethinker on Irish tax treatment of investment income - my Irish relatives tell me it is punitive. Taxes on investment income were raised after the financial crisis.

3) If you are going to be living in Ireland, but pulling money from your US investments, be careful not to get clobbered by exchange rate fluctuations. It could mean the difference between pulling 2% and 4% from your investment pot, if the dollar depreciates. Maybe you could pull 1-2 years of living expenses over to Ireland when the exchange rate is good, then you can ride out any exchange rate fluctuations?
Plans are nothing; planning is everything - Dwight D. Eisenhower

Topic Author
MickMal
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by MickMal » Mon Apr 29, 2019 3:49 pm

Thanks, I appreciate your advice. We are heading to
Ireland in three weeks to visit family and I will ask a friend there who is an accountant.

DJN
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by DJN » Mon Apr 29, 2019 10:53 pm

MickMal wrote:
Mon Apr 29, 2019 3:49 pm
Thanks, I appreciate your advice. We are heading to
Ireland in three weeks to visit family and I will ask a friend there who is an accountant.
Just a few words of caution, the soup of investment that you will swim in in Ireland is "thick" and viscous. The average adviser (and there are a few) has one thing in mind and that's your fees (and the average fee bill is high between adviser's costs and annual fees etc). Fair enough, except that most advisers are tied agents who earn a fee from referral to insurance companies that provide expensive pension and investment products. The most difficult aspect of self investing from Ireland is the very high local tax on funds, in particular UCITS etfs which are subject to a 41% tax on all gains. This is applied every 8th year irrespective of whether you sell or not, if you don't sell you are deemed to have sold and have to pay the tax at 41% on the gain. Read this section: https://www.bogleheads.org/wiki/Investing_from_Ireland. A potential alternative is to consider if one of you might be non domiciled and this could allow the use of offshore funds. Another avenue to explore is non habitual residence: https://www.bogleheads.org/wiki/EU_non- ... _residence
I will add that if you have access to US based funds these are taxed at your marginal rate.
good luck and happy reading!
DJN
Last edited by DJN on Tue Apr 30, 2019 5:02 am, edited 1 time in total.
Yah shure. | Have a look at the Bogleheads Wiki in the first instance.

Valuethinker
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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by Valuethinker » Tue Apr 30, 2019 4:53 am

Tourne wrote:
Mon Apr 29, 2019 3:07 pm

If I understand correctly, PFIC rules do not apply to ETFs, only to mutual funds.
So an Irish or Luxembourg domiciled ETF would do?

Then there would be no problem for an expat American in EU? Just buy the ETF.

I don't think that can be the case - or we would not have the discussions we have here about it?

My understanding was that PFIC applies to basically all non US-domiciled funds, including ETFs?

So an American living abroad can invest only in ETFs (or individual stocks) in the US. That having been said, most US brokerages won’t deal with American expats, as there are extra compliance/verification procedures to open the account, and there aren’t enough US expats to make it worth their while.

I am slightly confused because your first statement implies there is no problem with non US-domiciled ETFs. However your second statement implies there is?

The problem is: an American resident in the EU will not easily be able to find a European brokerage that will sell him or NYSE listed ETFs - the MIFID II/ PIRR rules.

If they can keep open a US account then the problem is solved.

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Re: Anyone familiar with Irish/US tax law for dual Irish/American citizen couple retiring in Ireland?

Post by TedSwippet » Fri May 03, 2019 5:41 pm

Valuethinker wrote:
Tue Apr 30, 2019 4:53 am
Tourne wrote:
Mon Apr 29, 2019 3:07 pm
If I understand correctly, PFIC rules do not apply to ETFs, only to mutual funds.
... My understanding was that PFIC applies to basically all non US-domiciled funds, including ETFs?
Right. If you look at the definition of a PFIC, it clearly encompasses ETFs as well as 'traditional' index funds. It also encompasses investment trusts, and even some things that can appear on the surface to be ordinary stocks, if they happen to trigger the IRS's PFIC test internally.

As a US citizen, your main viable options are to use US domiciled funds and ETFs, or if these are unavailable to you due to practical limitations such as PRIIPs, a selection of passively managed individual stocks.

You can free yourself from this restriction by renouncing your US citizenship. If you will have no plans to live back in the US after retiring, and are happy to live with normal visitor-length stays in the country, that may be a way forwards. Renouncing US citizenship has become considerably more popular over the past decade, with the start of the increase coinciding with the passage of FATCA. If considering renunciation, you need to watch out for the US's spiteful exit tax.

Or, one of you, either you or your spouse, could renounce US citizenship and handle investing for you both -- that way it would be easier to regain US residency via a spousal green card if you do change your minds on not living in the US again. Though you would need to be aware of the limitations on gifts and bequests to the non-US citizen (there is no unlimited marital exemption for gifts or bequests to non-US citizens).

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