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Old 03-28-2014, 12:00 PM   #21
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Are you an EU citizen or do you have a specific visa that would allow you to move to an EU country? If you can establish permanent residency in the EU you should be able to avoid US state taxes, but it's obviously different for each state.

Vanguard will allow you to keep your account with them if you have an overseas address, but some companies won't. So you must check the day to day practicalities out before you leave the US. Vanguard in Europe is a different company to Vanguard US and you cannot simply transfer funds, certainly not IRAs as they don't exist in the EU

Also be aware that there might be restrictions on the types of investments you can own in the US when you move to an EU country. The UK has a set of rules governing the ownership of foreign mutual funds similar to the IRS PFIC rules. If the funds are inside an IRA you would be ok, but it's a bad idea to own US Vanguard mutual funds outside a US retirement account if you are a UK resident.....many Vanguard ETFs would be ok though.

You will have to deal with cross border taxation and should understand the terms of the tax treaty between the US and the country you move to in the EU. Where you live in the EU will have primary taxation authority over your money, but you must also pay US tax. So there are fairly complex rules as to which country gets paid first and what foreign tax credits you can take.
Indeed, this is the part I'm worried about. If I buy a house in EU (read property tax) or have interest-bearing accounts, I become taxable there too, and rightly so. This scenario may push me to renounce. One tax return is bad enough.
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Old 03-28-2014, 12:11 PM   #22
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Note that if a non resident makes a withdrawal from an IRA or 401k there is 30% withholding taken.
Now expatriation also results in all accrued capital gains being taxed as of that date. (For tax purposes it is assumed the assets were sold on that day).
I make a single withdrawal annually, and ask Vanguard to withhold 25% Fed + 10% State. The percentages are optional, my choice. So 30% probably means I'll get a refund, correct?

For accrued capital gains, are you referring to IRAs or regular accounts?
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Old 03-28-2014, 12:57 PM   #23
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Note that if a non resident makes a withdrawal from an IRA or 401k there is 30% withholding taken.
Now expatriation also results in all accrued capital gains being taxed as of that date. (For tax purposes it is assumed the assets were sold on that day).
The withholding is modified by many tax treaties.....eg an NRA resident in the UK is not subject to withholding......or indeed any US tax on income from an IRA.
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Old 03-28-2014, 12:59 PM   #24
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I make a single withdrawal annually, and ask Vanguard to withhold 25% Fed + 10% State. The percentages are optional, my choice. So 30% probably means I'll get a refund, correct?

For accrued capital gains, are you referring to IRAs or regular accounts?
30% withholding is only for NRAs....as a US citizen you are subject to the usual withholding, but you can't choose 0% withholding if you live overseas.

If you move overseas the state withholding should not be necessary.
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Old 03-28-2014, 01:14 PM   #25
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30% withholding is only for NRAs....as a US citizen you are subject to the usual withholding, but you can't choose 0% withholding if you live overseas.

If you move overseas the state withholding should not be necessary.
Are you a non resident alien? Any experiences in dealing with US-based IRA custodians from aboard? Are they comfortable with customers having non-US home address? I've activated Vanguard's new voice-recognition security feature, in anticipation of calling them while I'm on the road someplace.
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Old 03-28-2014, 01:23 PM   #26
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Are you a non resident alien? Any experiences in dealing with US-based IRA custodians from aboard? Are they comfortable with customers having non-US home address? I've activated Vanguard's new voice-recognition security feature, in anticipation of calling them while I'm on the road someplace.
I'm not an NRA, but I am a US/UK dual citizen and have looked at the implications of moving to the UK and managing my finances.....most of which are in the US.

Vanguard are one of the few companies that have no problem in servicing the existing accounts of non-US residents. How you are treated depends on your custodian. Some will ask you to move your account and some will only service retirement accounts.
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Old 03-28-2014, 02:38 PM   #27
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I'm not an NRA, but I am a US/UK dual citizen and have looked at the implications of moving to the UK and managing my finances.....most of which are in the US.

Vanguard are one of the few companies that have no problem in servicing the existing accounts of non-US residents. How you are treated depends on your custodian. Some will ask you to move your account and some will only service retirement accounts.
Thank you, that's good to know about VG. I was referring to IRAs, regular accounts can be moved any time with no restrictions(?). How would a British/German mutual fund deal with a 1/2+ $ million conversion/purchase, I read stories in the news about money-laundering concerns, and I'd hate to get into that type scenario.
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Old 03-28-2014, 02:44 PM   #28
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Thank you, that's good to know about VG. I was referring to IRAs, regular accounts can be moved any time with no restrictions(?). How would a British/German mutual fund deal with a 1/2+ $ million conversion/purchase, I read stories in the news about money-laundering concerns, and I'd hate to get into that type scenario.
Regular accounts can be moved, but if you have to be aware of the tax issues with owing certain investments. If you are a US citizen you should not own non-US mutual funds as they are taxed a punitive rates under PFIC rules. Other countries also have similar rules for their residents eg the UK has Reporting Funds Rules.
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Old 03-28-2014, 02:56 PM   #29
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I make a single withdrawal annually, and ask Vanguard to withhold 25% Fed + 10% State. The percentages are optional, my choice. So 30% probably means I'll get a refund, correct?

For accrued capital gains, are you referring to IRAs or regular accounts?
Regular accounts.
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Old 03-28-2014, 03:12 PM   #30
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Regular accounts can be moved, but if you have to be aware of the tax issues with owing certain investments. If you are a US citizen you should not own non-US mutual funds as they are taxed a punitive rates under PFIC rules. Other countries also have similar rules for their residents eg the UK has Reporting Funds Rules.
I see, so Sam considers a British bond fund to be a PFIC ?

In that case, if you want to move to EU with your assets you pretty much have to renounce US citizenship? Seems like they put you between a rock and a hard spot, unless you're a tax geek and enjoy that sort of thing.
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Old 03-28-2014, 03:37 PM   #31
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I see, so Sam considers a British bond fund to be a PFIC ?
Yes

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In that case, if you want to move to EU with your assets you pretty much have to renounce US citizenship? Seems like they put you between a rock and a hard spot, unless you're a tax geek and enjoy that sort of thing.
You could invest your money in individual shares outside the US and be tax efficient and there are tricks with insurance wrappers that you can play. But foreign pooled investments ie foreign mutual funds should be avoided.

If a US citizen moves to the UK and wants to invest regular money in pooled investments they should use the US Vanguard ETFs that are UK reporting funds
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Old 03-28-2014, 04:14 PM   #32
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Yes



You could invest your money in individual shares outside the US and be tax efficient and there are tricks with insurance wrappers that you can play. But foreign pooled investments ie foreign mutual funds should be avoided.

If a US citizen moves to the UK and wants to invest regular money in pooled investments they should use the US Vanguard ETFs that are UK reporting funds

I wish I had a CFO like you, a British accent always tricks out American customers.

Don't you agree though that renouncing citizenship simplifies things?
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Old 03-28-2014, 04:18 PM   #33
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I wish I had a CFO like you, a British accent always tricks out American customers.
Yes and we also make the best bad guys in movies too.

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Don't you agree though that renouncing citizenship simplifies things?
Renouncing certainly makes your taxes easier, but it's a big step if you have family in the US or would ever want to return.

FYI US citizenship renouncements are increasing, but they are still a small number, maybe 3000 a year.
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Old 03-28-2014, 04:31 PM   #34
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Yes and we also make the best bad guys in movies too.



Renouncing certainly makes your taxes easier, but it's a big step if you have family in the US or would ever want to return.

FYI US citizenship renouncements are increasing, but they are still a small number, maybe 3000 a year.
Does the US extradite on taxes? If you left and never intended to or did treturn, and had citizenships like the original poster, then what could the US do if you left and took your money with you. If they don't/cant extradite as many treaties do protect citizens.
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US STATE tax when retired and living in Europe.
Old 03-28-2014, 08:22 PM   #35
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US STATE tax when retired and living in Europe.

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Does the US extradite on taxes? If you left and never intended to or did treturn, and had citizenships like the original poster, then what could the US do if you left and took your money with you. If they don't/cant extradite as many treaties do protect citizens.

TL ; DR ... You can't take it with you. Trying to transfer large sums of cash or liquid investments tends to draw attention.

They collect the taxes when you renounce. It's done as an 'exit tax'. All assets are 'marked to market', or deemed as sold the day before you terminate citizenship. You then owe tax. This hits anyone with a net worth of 2 million or more, or with an income tax of roughly $145,000 a year in the past 5 years. (It gets inflation and bracket adjusted regularly.)

The details are here: http://www.irs.gov/Individuals/Inter...patriation-Tax
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Old 03-28-2014, 08:31 PM   #36
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I've been spending a few months in EU every year, if I move away permanently why would I care about a US driver's license or jury duty? I can get a DL in Europe.

Renouncing citizenship, I've thought about it, but it's uncharted territory for me.
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Old 03-29-2014, 10:30 AM   #37
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FYI US citizenship renouncements are increasing, but they are still a small number, maybe 3000 a year.
I'll let this comment pass other than saying if all 3000 of those people renounced due to the difficulties with tax obligations in their country of birth (most highly unlikely for all 3000), then that would be 3000 times as many as those driven to renounce for the same reason by any other civilised country anywhere on earth.

Renunciation is being talked about rather freely here except for the comments from nun ("but it's a big step if you have family in the US or would ever want to return.") Let's not talk about the reasons for renunciation, but instead, talk about the practical elements. It's appropriate for this forum since most of those facing this decision are the relatively successful US Persons (including expats) approaching retirement age. They've accumulated a reasonable amount of funds, or at least enough for the sum to be a significant consideration regards US reporting.

Let's also assume we're discussing long term expats; those who no longer have a need to view the US as a bolt hole to escape to in the future.

The first element, as nun rightly points out, is the family centre of ones life. Their immediate family may be in the country they now live in, but they may also have aging parents or children in the US who may require their attendance in the US for periods of more than 6 months due to health/end of life situations. An ESTA is only valid for 6 months maximum. In this case, retaining US Citizenship becomes valuable.

I would also add there are laws currently in force to prevent a US Citizen who has renounced for tax reasons (e.g. is subject to the 'exit tax') from returning to the US under any circumstances. Google the 'Reed Amendment'. So far, this law is being ignored and is not enforced.

The second element is the location of their financial centre. If most of their income and investments are in the US, then tax filing is simplified. The only drawback is the addition of sources in the 'new' country. As has been explained in previous posts, these can complicate US filing substantially and the individual will find it complicated (for US tax reasons) to have many types of accounts which are advantageous for the normal resident of that country. You will find it difficult to invest as a 'local'.

If their financial centre is in the 'new' country (e.g. where most of their income and investments are), then renunciation becomes a much more likely consideration.

Last, and a subject rarely discussed on expat forums; renunciation can only be achieved by those able to qualify. I'm not talking about needing a 2nd citizenship, but instead the requirement to be able to grasp mentally what they are doing (renouncing). It is a requirement by the US Department of State. Now consider the situation if the individual has dementia. They will not be allowed to renounce. Who completes their US tax forms. If they have been doing these themselves, or if their immediate family would have no idea where to begin (an NRA spouse?), who completes the forms? Qualified tax advisors in foreign countries are expensive. It's another consideration for those US expats.
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Old 03-31-2014, 10:33 AM   #38
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I'll let this comment pass other than saying if all 3000 of those people renounced due to the difficulties with tax obligations in their country of birth (most highly unlikely for all 3000), then that would be 3000 times as many as those driven to renounce for the same reason by any other civilised country anywhere on earth.
The 3000 number really needs some examination.

The renouncer needs to have another citizenship to renounce, so I expect many are not US born citizens, but are naturalized citizens who return home and then renounce for convenience, usually involving taxation.

Some will be accidental Americans who have a US parent or were born in the US, but have never lived in the US and have no other connections to America.

It would be interesting to see the number of US citizens who actually grew up in the US that decide to renounce. I expect that number to be small because of emotional and family ties.
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Old 04-01-2014, 01:31 PM   #39
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Paying taxes in your country of residence is only fair, but if you don’t live in the US and thus do not avail yourself of US public goods, then it’s obviously an abuse by the state. US is the only country that taxes non-residents for life, even on income earned abroad! Imagine if Canada wanted a cut too, but it doesn’t, because I don’t live there nor did I earn it there.

In EU I’d be taxable as a permanent resident. But the prospect of 3 countries wanting to tax the same income is confiscatory taxation. There is no “exit tax” unless you’re obviously doing it to evade taxes, I’d only be escaping from a tax predator that’s holding my nestegg hostage.

Maximum tax rate is ~50%, my annual rate ~20%. So if I sell a $1/2-million IRA then it’s a big tax hit (30% more), but you can take it and leave and never owe US taxes again (or do as I posted earlier). Regular accounts are transferable any time. In my case they’re in bond funds with negligible capital gain/loss, so that part is easy. Plus I forfeit the Medicare that I’ve paid into. Did I leave anything out?
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Old 04-01-2014, 01:45 PM   #40
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Paying taxes in your country of residence is only fair, but if you don’t live in the US and thus do not avail yourself of US public goods, then it’s obviously an abuse by the state. US is the only country that taxes non-residents for life, even on income earned abroad! Imagine if Canada wanted a cut too, but it doesn’t, because I don’t live there nor did I earn it there.

In EU I’d be taxable as a permanent resident. But the prospect of 3 countries wanting to tax the same income is confiscatory taxation. There is no “exit tax” unless you’re obviously doing it to evade taxes, I’d only be escaping from a tax predator that’s holding my nestegg hostage.

Maximum tax rate is ~50%, my annual rate ~20%. So if I sell a $1/2-million IRA then it’s a big tax hit (30% more), but you can take it and leave and never owe US taxes again (or do as I posted earlier). Regular accounts are transferable any time. In my case they’re in bond funds with negligible capital gain/loss, so that part is easy. Plus I forfeit the Medicare that I’ve paid into. Did I leave anything out?
You have to work things out with a knowledge of the tax treaty between the US and where you'll be resident. You might come out better by staying as a US citizen, or leaving money in the US as an NRA, and using the treaty given the usually higher EU personal income taxes. An example is the way a UK resident NRA can use the treaty and IRA to ROTH conversions to produce low tax income.
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