Americans living in the Netherlands are facing increasing restrictions on what they can and cannot do financially, for a variety of reasons. If you are affected, what are your options?

Many US banks and investment brokers are refusing to accept US citizens as clients once they have left the country because of the increased compliance burdens they face. And that means more and more Americans abroad are finding their investment accounts back home either restricted from trading or are closed completely – whether or not it was a good moment to sell.

These problems can also extend to retirement accounts, posing an additional problem for US citizens who make their home abroad.

‘If you have a US retirement scheme which takes action against you, in a best case scenario you will be restricted from trading,’ says Luke Staden, an advisor at the Blacktower Financial Management group, who specialises in US nationals.

This, he says, is a massive problem because retirement accounts need to manage risk effectively. ‘In the worst case scenario you will be asked to find a new retirement account custodian or have your account closed altogether which can have overwhelming tax and early access penalties.’

FACTA

But there are other issues too. Because of the Foreign Account Taxation Compliance Act all US citizens or individuals with IRS reporting obligations have to report their foreign bank accounts to the IRS.

FATCA was introduced to target Americans hiding money offshore but has resulted in  requiring all American expats to report their local bank accounts. And that, in turn, has led some foreign banks to turn their backs on American clients as well because of the risk of being non-compliant with FATCA.

A further problem is that if a US expat does manage to invest while abroad they often accidently put their money into what are classified as Foreign Passive Investment Companies (PFICs). But the IRC classifies PFIC growth as taxable income rather than capital gains – so the tax is also far higher.

‘I think most expats have already thought about investing but often found it too hard to accomplish,’ Staden.

Authorisation

The other option, of course, is to work with advisers who are authorised and regulated in both the US and your local country of residency who understand both the rules and regulations in the US but also where you live, and can transfer your investment account funds into a FATCA and PFIC compliant investment product.

‘Doing nothing means not investing and then your capital is eroding due to inflation,’ says Staden. ‘The nuclear option is to revoke your US nationality and remove yourself from your IRS reporting obligations. While this solves the problem, it requires having a second nationality or becoming stateless and, depending on your circumstances, there can be a huge tax bill for removing your US nationality as well. Not to mention most Americans have no intention of surrendering their citizenship.’

Blacktower is one of the very few firms outside the US which has advisers who are authorized in both the US and in their local jurisdictions and who have a fiduciary responsibility to their clients.

Worldwide

‘We have offices around the globe, of course, and that includes the Netherlands, so we have a presence for US expats in the Netherlands in both countries,’ says Staden. He is now finalising a webinar open to all US citizens abroad, which will focus on the financial issues they face and possible solutions.

‘The presentation will have polls, chat and finish with a Q&A where attendees be able to ask any questions about topics which have not been covered or that need further elaboration,’ he says.

‘But the most important thing is to be sure you are investing and acting in accordance with both US and local laws and regulations. And that also means making sure you have a properly qualified advisor who takes your best interests into account.’

Luke Staden is hosting an webinar for US expats on how to overcome their specific problems on Marc 21. Sign up here