Beginner - Investing for EU while in US

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Topic Author
pierre.x.l
Posts: 3
Joined: Sat Sep 02, 2017 10:09 pm

Beginner - Investing for EU while in US

Post by pierre.x.l » Sat Oct 05, 2019 9:48 pm

This is a pretty open-ended question but I really need advice so I can get started on the right foot.

I'm an EU national living in US (green card) but will retire in EU, exact timeframe and EU destination is TBD. Looking for guidance on how to invest in the meantime. We are not talking a long timeframe, probably less than 5 years. Should I:
- Invest in EU domiciled Euro (€) fund now and report any gains appropriately on IRS return while in US?
OR
- Invest in a Roth IRA? My income is above the threshold where traditional IRA contributions would be deductible. I also have a 401k and right now I'm leaning towards rolling that into a custodial account on departure rather than cashing out and taking a 10% hit. I would follow same approach for IRA.

Finally, any thoughts on which EU countries are best for DIY investors?

Thanks.
-P

User avatar
Hyperborea
Posts: 824
Joined: Sat Apr 15, 2017 10:31 am
Location: Japan

Re: Beginner - Investing for EU while in US

Post by Hyperborea » Sun Oct 06, 2019 2:07 am

A couple of things to think about. How long have you had the green card and how long will you have had it when you leave? If that's more than 7 years (calendar years - even a single day in the year makes it count) then you will need to be aware of expatriation taxes. This will potentially hit all your assets, even those you had before you became a US resident. The current rules are here but they can change and have a number of times - https://www.irs.gov/individuals/interna ... iation-tax

Second, since you are retiring and don't have to go back to Europe directly it may make sense to spend a year in a location with favourable tax laws where you can sell all your assets and wash away the capital gains before you return to Europe. Whether this makes sense or not depends on the amount of capital gains that you have at the time you plan to return to Europe. I'm doing the washing of capital gains in Japan (was a US resident with a green card before) where I get 5 years of no taxes on assets held outside Japan. There are others like this too - I understand that Thailand and perhaps Malaysia let you do something similar and there are likely more too.

Roth type accounts can be troublesome since many countries don't consider them as tax exempt retirement accounts and even fewer will allow you to take the assets out and pay no tax. Best to check the laws of the country you plan to retire to. You might also be able to pull money out all your retirement accounts tax free if you do the year in a country with favourable tax laws. If you are 59.5 or older in the year that you do it then you can also avoid the US 10% early withdrawal penalty.

Don't invest in any non-US funds or ETFs while a US resident. The US PFIC laws will hit you hard on both taxes and paperwork.
It’s hard to win an argument with a smart person, it's damn near impossible to win an argument with a stupid person. - Bill Murray

Topic Author
pierre.x.l
Posts: 3
Joined: Sat Sep 02, 2017 10:09 pm

Re: Beginner - Investing for EU while in US

Post by pierre.x.l » Sun Oct 06, 2019 9:46 am

This is exactly what I was hoping for, thank you!

Washing of capital gains in "Japan" - Can you provide some insight into the mechanics of how to do this? Do you need to depart US (having completed expatriation process) within first X months of the year to avoid need to file a US return for that year? Do you sell the assets before departing the US?

Also, how did you research this beforehand? Did you use any specific advisory service?

My GC is only 2 years old so I have some breathing space, I'm watching those expatriation rules closely though.

Was not aware how onerous US PFIC laws are, suppose that means it's same scenario as above (IRA/401k) and need to find a way to wash capital gains before returning to EU.

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