A successful stay abroad comes with lots of preparation. The longer the stay, the more the preparation. And If you are planning on putting down roots in Europe, make sure you understand the European financial system as it relates to the American version. America has tons of regulation that is different than anywhere else in the world. So, while having a US passport can have lots of benefit, there is a small price to pay when being associated with Uncle Sam (or it could be a large price).
This article isn’t to convince you not to stay in Europe but is rather a way for you to understand the varying regulations that come with having a foreign bank account as an American. That way you can completely own your stay abroad (at least from a financial perspective) and have a successful trip.
In this article, we’ll go over three key items to understand when opening and/or maintaining a bank account as an American expat.
Know FinCEN Form 114
Ah, FinCEN Form 114. It just rolls off the tongue…
Jokes aside, FinCEN Form 114 deals with foreign bank accounts that have more than $10,000 in aggregate at any time in the calendar year. If you own a bank account totaling this amount or more, then you will be required to submit this form. From 1970 to 2013, this form could be filed in paper form but starting after June 2013, this form is now submitted electronically. Known also as FBAR (Foreign Bank Account Report), FinCEN Form 114 can have hefty penalties for failure to comply. If failing to file is found to be willful, penalties can incur between the greater of $100,000 or 50% of the account balance. Non-willful penalties for failure to comply with FBAR are less but can still be a burden.
So, speak with your financial advisor today to ensure you are up to date with FBAR and your FinCEN reporting duty.
Navigate Double Taxation
Earlier, we mentioned Uncle Sam’s affiliation comes (most likely) with a price. Double taxation is that price. Unlike almost every other country, the United States taxes its citizens on foreign income even if that income is earned with foreign partners in a foreign country.