As a U.S. Expat working overseas, you have a wide variety of domestic and foreign investment options at your fingertips. If you are like most US Expats, you may believe: “As long as I report all of my foreign financial accounts on FBAR, it doesn’t matter where I keep my money.”
Technically speaking, that’s true; the Department of Treasury isn’t interested in taking your money or dictating the place(s) in which it can be held or invested. The IRS, on the other hand, is not only interested in your reporting foreign financial account information; it’s interested in taxing your income from foreign investment accounts at the highest possible percentage – even at a rate of up to 50%!
This article will focus on a common type of foreign investment known as PFIC (Passive Foreign Investment Corporation).
Understanding PFIC’s and how they can affect your U.S. expat tax return will help you make wiser investment decisions and save money both now and in the future.