Non resident Alien considering relocation from US to EU

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Useful_Monk
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Joined: Tue Nov 12, 2019 9:48 am

Non resident Alien considering relocation from US to EU

Post by Useful_Monk » Tue Nov 12, 2019 10:47 am

I'm a non-resident alien (Green Card holder). I've lived in the US for 20 years. I'm considering relocating to the EU. I have substantial savings in my 401K and personal Vanguard accounts. If I were to relocate to the EU, I would have to give up my Green Card status. I have grown comfortable using my Vanguard accounts both for mutual funds and brokerage transactions. I'm wondering if this is possible even if i were to relinquish my status and relocate. Should I transfer these out to EU banks/brokerages? What factors should I consider (tax, ease of transfer in and out of the US accounts, anything else)?

TedSwippet
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Location: UK

Re: Non resident Alien considering relocation from US to EU

Post by TedSwippet » Tue Nov 12, 2019 2:16 pm

Welcome.
Useful_Monk wrote:
Tue Nov 12, 2019 10:47 am
I'm a non-resident alien (Green Card holder). I've lived in the US for 20 years. I'm considering relocating to the EU. I have substantial savings in my 401K and personal Vanguard accounts. If I were to relocate to the EU, I would have to give up my Green Card status. I have grown comfortable using my Vanguard accounts both for mutual funds and brokerage transactions. I'm wondering if this is possible even if i were to relinquish my status and relocate.
It may well depend on where you go. It seems that Vanguard have differing policies depending on the country involved (and things like their tax treaty status, or otherwise, with the US). The only way to know what they will (or might) do is to ask them.

I can give you one data point. I moved from the US to the UK, but still hold my Vanguard US accounts over a decade later -- 401k, IRA, and taxable. Vanguard lets me do most of what I want, but it may take snail-mail rather than online. I can transfer between funds readily in IRA and 401k, but Vanguard won't allow me to add brokerage options to any of my accounts, making it a non-starter for me when it comes to using it for any actual taxable investing (see below for why). Getting money out of Vanguard can be frustrating, because they will not allow me to set up new payees easily without a 'medallion signature guarantee', something that is broadly unavailable outside the US. I cannot use voice verification, nor can I use 2-factor auth with a non-US mobile phone number.

Oh, and actually, as a green card holder you are currently a 'US resident alien'. Just three letters different in spelling, but a world away in tax terms.
Useful_Monk wrote:
Tue Nov 12, 2019 10:47 am
Should I transfer these out to EU banks/brokerages? What factors should I consider (tax, ease of transfer in and out of the US accounts, anything else)?
Maybe. Moving stuff to Interactive Brokers would perhaps be a good intermediate step. These are people who know how to deal with international lifestyles. Moving to a European broker would mean you having to sell everything taxable to cash, and then repurchasing equivalent UCITS ETFs. A relatively new EU regulation known as PRIIPs currently prevents EU residents from buying US domiciled funds and ETFs. This might produce a capital gain realisation that you would rather avoid.

I believe Interactive Brokers offer IRAs. However, EU brokers will not. Or you could leave this in Vanguard, and move the taxable part only (perhaps as cash). That is what I did.

If you are moving to a country without a US estate tax treaty, you will want to move as much as you can out of the US. For nonresident aliens, US estate taxes begin after a miserly $60k exemption (compare to $11mm for US citizens).

As for tax, make sure that your new country does not have unfavourable tax rates for 'offshore' funds and ETFs, an analogue to the US's horrible PFIC rules. The UK does, although a few selected Vanguard US domiciled ETFs escape it. Unfortunately for me, Vanguard will not allow me to add brokerage to my account, and the mutual funds I could hold with them would run into the UK's punitive (though far less so than PFIC) taxes for 'offshore' funds.

Finally, you mention "substantial savings". If above $2mm you will have to tangle with the US's appalling 'expatriation tax'. This could give your retirement accounts a haircut of up to 35% on the day you leave, and set you up for huge double-tax problems in future, so well worth avoiding. Also, 'deemed disposition' of assets and a potential capital gains tax on unrealised gains. Nasty, and spiteful, if it hits you.

More in the wiki: Outline of Non-US domiciles - Bogleheads

Topic Author
Useful_Monk
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Joined: Tue Nov 12, 2019 9:48 am

Re: Non resident Alien considering relocation from US to EU

Post by Useful_Monk » Wed Nov 13, 2019 10:37 am

Thank you. This is super helpful. Gives me several areas to research.

bgreat
Posts: 108
Joined: Tue Jun 25, 2019 11:48 pm

Re: Non resident Alien considering relocation from US to EU

Post by bgreat » Thu Nov 14, 2019 1:39 am

TedSwippet wrote:
Tue Nov 12, 2019 2:16 pm
Useful_Monk wrote:
Tue Nov 12, 2019 10:47 am
Should I transfer these out to EU banks/brokerages? What factors should I consider (tax, ease of transfer in and out of the US accounts, anything else)?
Maybe. Moving stuff to Interactive Brokers would perhaps be a good intermediate step. These are people who know how to deal with international lifestyles. Moving to a European broker would mean you having to sell everything taxable to cash, and then repurchasing equivalent UCITS ETFs. A relatively new EU regulation known as PRIIPs currently prevents EU residents from buying US domiciled funds and ETFs. This might produce a capital gain realisation that you would rather avoid.

I believe Interactive Brokers offer IRAs. However, EU brokers will not. Or you could leave this in Vanguard, and move the taxable part only (perhaps as cash). That is what I did.
I'm not sure the bolded part is true: you should be able to transfer existing assets in kind, BUT only if they're in ETF form. (But Vanguard also seem to allow you to convert most funds to ETF form?) The EU brokers wouldn't allow new purchases, but in-kind transfers should be OK.

I would second the split approach: I know quite a few people holding Vanguard or Fidelity 401k's and IRA's, but doing their taxable investments in e.g IB.

(But in case OP meant Europe instead of EU: there are some European countries that aren't in the EU, e.g. Switzerland, where PRIIPS et al don't apply, with some caveats around an equivalent law that will seemingly only apply to Swiss brokers/not to execution-only brokers/not apply until 2 years from now. But beware that some non-EU countries still implement parts of EU law, e.g. Norway is covered by PRIIPS. The UK has equivalent legislation that applies after Brexit, and the 2-main international brokerages - IB and Schwab - have UK offices meaning moving to the UK won't get you out of it either even if Brexit ever happens.)

Topic Author
Useful_Monk
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Re: Non resident Alien considering relocation from US to EU

Post by Useful_Monk » Thu Nov 14, 2019 8:47 am

But in case OP meant Europe instead of EU
I'm thinking of Germany as my primary option, followed by France and Sweden.

TedSwippet
Posts: 2520
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Non resident Alien considering relocation from US to EU

Post by TedSwippet » Thu Nov 14, 2019 8:55 am

Useful_Monk wrote:
Thu Nov 14, 2019 8:47 am
I'm thinking of Germany as my primary option, followed by France and Sweden.
Germany and France both have usable US estate tax treaties, leaving you safe from US estate tax up to $11m of assets.

Sweden does not, so here you would only get the miserly $60k US estate tax exemption. If you move to Sweden and your combined 401k and IRA balances exceed $60k this is a potential problem, even if you move all your taxable holdings to non-US domiciled funds. The US considers 401k and IRA accounts to be 'US situs' for US estate tax, no matter what they contain.

wineandplaya
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Re: Non resident Alien considering relocation from US to EU

Post by wineandplaya » Fri Nov 15, 2019 8:39 pm

TedSwippet wrote:
Thu Nov 14, 2019 8:55 am
Useful_Monk wrote:
Thu Nov 14, 2019 8:47 am
I'm thinking of Germany as my primary option, followed by France and Sweden.
Germany and France both have usable US estate tax treaties, leaving you safe from US estate tax up to $11m of assets.

Sweden does not, so here you would only get the miserly $60k US estate tax exemption. If you move to Sweden and your combined 401k and IRA balances exceed $60k this is a potential problem, even if you move all your taxable holdings to non-US domiciled funds. The US considers 401k and IRA accounts to be 'US situs' for US estate tax, no matter what they contain.
Maybe an argument for buying an annuity if plan is to retire in Sweden or other non-treaty countries?

Bernard
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Re: Non resident Alien considering relocation from US to EU

Post by Bernard » Fri Nov 15, 2019 9:25 pm

As a former immigration attorney, let me tell you that you are NOT a non resident alien. You are a resident alien. A lawful permanent resident in USCIS lingo, in short, a LPR.

I wonder why you don't you naturalize, after 20 years as a Green Card holder?
There are only 2 reasons I can think of:

1) Your original country of citizenship (which you forgot to mention) doesn't allow multiple citizenship, and you are 100% sure that you never want to live in the United States again, but in a EU country instead. (I'm not allowed to post my opinion about the future of the EU here.)
2) Your income is so substantial, that you'll blow right through the threshold of double taxation, even leveling out the tax advantages you'd have as a US citizen.

bgreat
Posts: 108
Joined: Tue Jun 25, 2019 11:48 pm

Re: Non resident Alien considering relocation from US to EU

Post by bgreat » Sat Nov 16, 2019 4:07 am

Bernard wrote:
Fri Nov 15, 2019 9:25 pm
2) Your income is so substantial, that you'll blow right through the threshold of double taxation, even leveling out the tax advantages you'd have as a US citizen.
What is this supposed "threshold of double taxation"?

Anyhow I certainly can't post my opinions about the future of the US here either : ), don't feel so bad.

TedSwippet
Posts: 2520
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Non resident Alien considering relocation from US to EU

Post by TedSwippet » Sat Nov 16, 2019 4:18 am

Bernard wrote:
Fri Nov 15, 2019 9:25 pm
1) Your original country of citizenship (which you forgot to mention) doesn't allow multiple citizenship, and you are 100% sure that you never want to live in the United States again, but in a EU country instead.
Can you say why the first qualification, your country not allowing multiple citizenship, is here?

If someone is going to leave the US and is 100% sure they will never want to live in the US again, that to me seems plenty enough reason on its own to not become a US citizen before departing. In the statement above, the correct logical conjunction seems to be "or" rather than "and".
Bernard wrote:
Fri Nov 15, 2019 9:25 pm
2) Your income is so substantial, that you'll blow right through the threshold of double taxation, even leveling out the tax advantages you'd have as a US citizen.
Please could you identify these advantages? There was a recent thread about this topic that came up more or less empty.

However, there are a lot of disadvantages for US citizens abroad. Not taking US citizenship makes it much easier and cheaper to disconnect fully from the IRS when leaving.

Topic Author
Useful_Monk
Posts: 4
Joined: Tue Nov 12, 2019 9:48 am

Re: Non resident Alien considering relocation from US to EU

Post by Useful_Monk » Sat Nov 16, 2019 5:31 am

Bernard wrote:
Fri Nov 15, 2019 9:25 pm
As a former immigration attorney, let me tell you that you are NOT a non resident alien. You are a resident alien. A lawful permanent resident in USCIS lingo, in short, a LPR.
Yep. Sorry about that. Should I just change the title? This is my first post.
I wonder why you don't you naturalize, after 20 years as a Green Card holder?
There are only 2 reasons I can think of:

1) Your original country of citizenship (which you forgot to mention) doesn't allow multiple citizenship, and you are 100% sure that you never want to live in the United States again, but in a EU country instead. (I'm not allowed to post my opinion about the future of the EU here.)
2) Your income is so substantial, that you'll blow right through the threshold of double taxation, even leveling out the tax advantages you'd have as a US citizen.
I have lived here for 20 years. Got my GC in 2011. My reasons for not naturalizing are a little mundane. I have never thought of myself as American. (Don't get me wrong, I love living here!). I always had plans to relocate. Just ... never got around to actually doing it.
Also yes, my country of origin does not allow dual citizenship.

Like another poster to this thread, I'm not aware of double taxation limits. Off to research on that.

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