Cross-Border & Expat Investing
Tax Residency Basics
Your tax residence determines which country taxes your worldwide income. The US taxes based on citizenship (not just residency). Most other countries tax based on physical presence (183-day rule) or permanent home.
Key tests by country:
- US: Substantial Presence Test (31 days in current year + 183 days over 3-year weighted formula). Green card test.
- UK: Statutory Residence Test (SRT) — days in UK + ties to UK.
- Canada: Primary and secondary residential ties.
- Australia: Resides test + domicile test + 183-day test.
- Singapore: 183-day physical presence or employment.
- EU countries: Typically 183-day rule plus centre of vital interests.
US Citizens & Green Card Holders Abroad
The US taxes its citizens and green card holders on worldwide income regardless of residence. Key considerations:
- Foreign Earned Income Exclusion (FEIE): Exclude up to $126,500 (2026) of foreign earned income if your tax home is in a foreign country. Form 2555.
- Foreign Tax Credit (FTC): Credit foreign taxes paid against US tax liability. Often eliminates double taxation. Form 1116.
- FBAR: FinCEN Form 114. Report foreign financial accounts if aggregate balance >$10,000 at any point during the year. Maximum penalty for non-willful violation: $12,547 (2026).
- FATCA: Form 8938. Report specified foreign financial assets if they exceed $50,000 (single living abroad) / $100,000 (married filing jointly abroad). Penalties: $10,000 for failure to disclose, $10,000/month for continued failure (up to $50,000).
- PFIC (Passive Foreign Investment Company): The single biggest trap for US expats. Many foreign mutual funds, ETFs, and even some foreign insurance policies are PFICs. Taxed at top marginal rate (37%) with interest charge on deferral. Filing Form 8621 is notoriously complex. Avoid foreign funds completely if you are a US person.
Non-US Residents Investing in US Markets
- US Estate Tax: Non-US residents holding US-listed stocks (including ETFs) worth over $60,000 USD at death are subject to US estate tax (26-40% on the excess). Exception: LSE-listed UCITS ETFs are not considered US-situs assets. Ireland-domiciled ETFs are a popular workaround. US real estate (including REITs) is also subject to US estate tax.
- US Withholding Tax: 30% statutory on dividends (typically 15% under most treaties). File W-8BEN to claim treaty rate. Estates and trusts have different rules.
- US Broker Access: Interactive Brokers and Schwab International accept non-US residents. Many US brokers (Vanguard, Fidelity, Robinhood) do not accept non-residents.
Choosing a Broker as an Expat
Major considerations: tax reporting support, account restrictions by country of residence, estate tax exposure, currency conversion costs, and QI status.
- Interactive Brokers: Most international-friendly. Supports residents of most countries. Strong multi-currency support. Low FX fees.
- Schwab International: Good for long-term investors. Minimum $25,000. No margin accounts for non-US residents. Access to US ETFs and stocks.
- Saxo Bank: Strong in Europe and Asia. Higher minimum deposits and fees. Good for multi-currency.
- HSBC Expat (Jersey): Premium banking + investing. Requires HSBC Premier status (min $100k). Good for high-net-worth expats.
- LSE Brokers: Hargreaves Lansdown (UK), AJ Bell (UK), Trading 212 (UK/EU) — good for UK/EU residents accessing UCITS ETFs.
Country-by-Country Expat Summary
- UK → US: US taxes worldwide income from day 1. SIPP can be a PFIC (file Form 8891 is no longer needed but SIPP continuity is complex). UK ISAs are not tax-advantaged in the US.
- US → UK: Report US retirement accounts (401k, IRA) on UK Self Assessment. They are taxed as general pool of foreign pensions. The US-UK treaty provides significant relief. Beware of US PFIC rules on UK funds.
- Canada → US / US → Canada: Canada-US treaty is well-established. RRSPs and 401(k)s have cross-border recognition. IRS recognizes Registered Retirement Savings Plans (RRSPs) as tax-deferred. Canada Revenue Agency recognizes 401(k)s and IRAs as foreign trusts but with simplified reporting. T1135 filing may be required for Canadian residents with US accounts over CAD $100k.
- Australia → US: Superannuation is generally considered a grantor trust for US tax purposes. Report PFIC if applicable. Australian funds (ETFs/MFs) are likely PFICs. Best to sell before moving to the US.
- EU Countries: Most EU countries have tax treaties with the US. Many EU countries tax worldwide income for residents. The EU Savings Directive has been replaced by DAC6 (mandatory disclosure of cross-border arrangements).
Recommended Structures for Expats
- US Persons Abroad: Use US-domiciled ETFs (avoid PFICs). Maintain a US brokerage account. Keep foreign bank accounts under FBAR threshold if possible. File expat tax returns annually.
- Non-US Investors in US Markets: Use Ireland-domiciled UCITS ETFs (avoid US estate tax on holdings over $60k). Maintain W-8BEN with US brokers. Consider local tax-advantaged accounts first.
- Dual Citizens: File US taxes every year regardless of residence. Consider renunciation for those with no ties to the US (consult a professional — exit tax may apply over $2M net worth).