The Do’s and Don’ts of Investing Internationally as an Expat
Categories: Finance
Starting a new life abroad can be daunting. But now that you’ve settled in, it’s time to think about how you can make the most of your experience. With expats having more accessibility to investments than ever before, now is the time to invest. The following article goes over the Do’s and Dont’s of investing internationally as an Expat.
Do: Tax Research
When researching investments, a large player on whether your investment will end up adding to your bottom line is how it plays into your home and country of residence tax policy. Different investments have different tax qualifications which need to be considered when making an investment decision. For example: Foreign Mutual funds are considered PFICs by the US Government. This makes them subject to considerable tax rates. Speak with your financial advisor today about your foreign investments and how you can maximize your return with tax considerations.
Don’t: Hold Off
Although some offshore investments may come with ‘revenue-killing’ tax affiliations, it does not mean that all offshore investments will not contribute to your bottom line. There are many profitable ventures in foreign countries. Some expats may believe that the savings they incur through cost of living abroad and potentially higher salaries are enough to reach future financial goals. Not so fast– foreign investments are a great way to add to your financial well-being and should not be overlooked.
Do: Diversify your Portfolio
As an expat, you may be tempted to invest solely in your country of residence. This is not a best practice. Just as you would diversify your portfolio in your home country, diversifying investments in many foreign countries is the best way to go as an expat. This wasn’t always an easy thing to do as there were barriers to communicating with other countries. But now, with more online access, spreading out investments and communicating with those managing your portfolio is easier.
Don’t: Pay Too Much for an Investment
When looking at investments, it is not only good practice to research the investment itself but also the firm which you are buying with. Different firms may charge different fees for the same investment, so it’s best to shop around. US brokerage may have the best fees. However, this isn’t always the case so do your research before choosing a firm to go with.
Do: Report your Investments
As an expat, you’ll need to report your investments to your home country. In the US, citizens are required to report foreign bank accounts exceeding $10,000 to the IRS in addition to any passive investment in a foreign company or ownership stake. Failure to report such holdings can result in blowing fines. Each government has their own system on how to report financial holdings. Speak with your financial advisor to get an idea where you stand from a compliance standpoint.
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Beacon Financial Education does not provide financial, tax or legal advice.
None of the information on this site should be considered financial, tax or legal advice.
You should consult your financial, tax or legal advisers for information concerning your own specific tax/legal situation.