stephendisraeli
New member
@kiia
If your physical residence is in the EU, then the respective EU country will consider you a resident. In which case brokerage providers anywhere in the world are required to comply with the EU laws on retail investment products. And if the EU country has a way to enforce this law, the possible 5M€ fine should provide motivation for brokerage providers to at least give the impression of due diligence and KYC.
You may find some brokerage providers that ignore EU laws, but as soon as the EU finds a way to enforce fines on them, this source of US investment products may dry up.
If you use the foreign tax credit (instead of the foreign earned income exclusion) to reduce your US taxes due, then this income is considered to be taxed by the US and can be used to contribute to US pension plans. Probably not 401ks as far as I understand (I'm the one without US citizenship in my family and blundered directly into the PFIC trap when investing money belonging to my kids) as these require cooperation with the employer, but IRAs.
Finding a provider in the US that allows contributions to such plans by nonresidents is another matter, though.
Caution. MFJ will drag a non-US-citizen spouse into the US tax system. They will be considered a full US tax resident and unable to use large parts of the tax treaty. It will expose their investments and retirement plans to adverse and possibly punitive treatment by the US. Do not do this without due consideration.
ETFs that are not domiciled in the US (i.e. their ISIN does not beginn with US) are considered shares of "passive foreign investment companies", or PFICs, in the US tax return.
The consequences of this treatment are just terrible. The form to satisfy the reporting requirement is byzantine and time-consuming (US tax preparers will charge about $200 per copy, and one copy is needed for each ETF annually), and the taxation methods are extremely adverse (including the possibility for effective tax rates in excess of 100%, and unmitigated double taxation).
Aren't we considered residents indefinitely by the gov?
If your physical residence is in the EU, then the respective EU country will consider you a resident. In which case brokerage providers anywhere in the world are required to comply with the EU laws on retail investment products. And if the EU country has a way to enforce this law, the possible 5M€ fine should provide motivation for brokerage providers to at least give the impression of due diligence and KYC.
You may find some brokerage providers that ignore EU laws, but as soon as the EU finds a way to enforce fines on them, this source of US investment products may dry up.
Why should I even use a 401k if my income isn't getting taxed by the USA to begin with?
If you use the foreign tax credit (instead of the foreign earned income exclusion) to reduce your US taxes due, then this income is considered to be taxed by the US and can be used to contribute to US pension plans. Probably not 401ks as far as I understand (I'm the one without US citizenship in my family and blundered directly into the PFIC trap when investing money belonging to my kids) as these require cooperation with the employer, but IRAs.
Finding a provider in the US that allows contributions to such plans by nonresidents is another matter, though.
At present it looks like if I was MFJ
Caution. MFJ will drag a non-US-citizen spouse into the US tax system. They will be considered a full US tax resident and unable to use large parts of the tax treaty. It will expose their investments and retirement plans to adverse and possibly punitive treatment by the US. Do not do this without due consideration.
Why do you say single stocks? Why not ETFs?
ETFs that are not domiciled in the US (i.e. their ISIN does not beginn with US) are considered shares of "passive foreign investment companies", or PFICs, in the US tax return.
The consequences of this treatment are just terrible. The form to satisfy the reporting requirement is byzantine and time-consuming (US tax preparers will charge about $200 per copy, and one copy is needed for each ETF annually), and the taxation methods are extremely adverse (including the possibility for effective tax rates in excess of 100%, and unmitigated double taxation).