This blog is written specifically for US citizens, or those considered to be US-connected. If this describes you read on to find out how BMP Wealth can help you or watch this video where we talk to long-term US expat, Steve.

If this doesn’t apply to you but know someone from the US who might be interested in learning about managing their finances and meeting the often onerous regulatory requirements, please feel free to share the link.

Born in the US, Steve is a long-term expat. He has been living in Hong Kong for 38 years and has maintained his US citizenship throughout.

Arriving in Hong Kong as a financial journalist, Steve began working with Reuters 10 years later. In his role in sales and marketing, he was pivotal in developing Reuters’ relations with Hong Kong banks, brokers, and fund houses. Ultimately, he was working through a period where Hong Kong was growing as a global financial centre.

Dealing with FATCA and IRS reporting rules

Back in 2012, the Foreign Account Tax Compliance Act (FATCA) was passed as part of the HIRE (Hiring Incentives to Restore Employment) Act.

Having already lived in Hong Kong for 30 years, and working in the financial industry, Steve had lots of experience of sending in tax returns. With the introduction of FATCA, things became a lot more complicated.

With foreign financial accounts, for example, it is necessary to inform the IRS and the Treasury Department of the maximum amount that has been held in the account during the tax year.

As Steve explains, “You have to tell them the highest amount at any nanosecond during the year and that became much harder and much more intensive in terms of your data discovery and your own accounts.”

At the time of this change, some institutions baulked at the intense administration required. Many firms decided they could no longer deal with American expats. This even extended to some American institutions, based in the US, refusing business from Americans abroad.

The severe restrictions and penalties imposed by the FATCA can make it extremely difficult to find an investment manager in Hong Kong.

All our portfolios for US-connected individuals are FATCA and IRS compliant

We ensure that all portfolios for US-connected individuals are fully compliant with FATCA and IRS reporting rules. We also ensure that the institutions can supply the highest quality tax reports in a compliant manner. This should save you lots of time and accountancy bills.

Please get in touch to find out more.

Steve’s tips for the main things American expats should be thinking about

Take your tax obligations seriously

Record and report all your income, even income that’s not readily transparent. This is important because, if you’re audited, all your bank accounts will be reviewed and any deposits will have to be explained.

Think about your outgoings

Be sure to stay on top of all your accounts, and report all your income every year. This can be particularly difficult for older US expats using investments as income as you’ll have quarterly payment obligations, which can make it harder to determine.

Remember to report any gains from overseas pensions

Any overseas pension gains must be reported annually. Even if you haven’t received any money and it is being held for your retirement, you must report it and pay the tax owed.

Rather than being charged tax on a long term capital gain at a lower rate, overseas pension growth is taxed as income.

Adopt the right attitude

Make sure that, when you invest, you’re on a platform where the reporting can be done correctly and swiftly. Then, know when it’s time for you to report and make sure you comply.

As Steve says, “Be accurate. Be honest. And if you spot a mistake with your reporting, and I have done so, get in touch and let the IRS know – don’t let it slide. […] Pay the tax now because penalty later is a harsher solution.”

Saving and investing as an expat

When it comes to investing as an expat, Steve recommends investing a portion of your income.

“If you have a salary, be sure you’re setting some aside for investments. It may take a few years to build up, but you’ll then have something on which to base your investments,” he says. “For example, with my Hong Kong MPF (Mandatory Provident Fund), I donated a large part of my salary to the voluntary portion of MPF. This came in handy when I needed to pay off my mortgage.”

Again, this is an area where BMP Wealth can help. Our objective is to help our clients live the lifestyle they want, without running out of money.

Understanding how you want to live your life means knowing how much your lifestyle costs, both now and later. Using cutting edge fintech, your BMP Wealth Manager will help you model the costs and build a blueprint, showing how much you need and when you’ll need it. We can then see if you have “enough”.

Make sure you know your taxes

The tax rules around investments can be complex. So, when you make a new investment, talk to your tax adviser so they can understand what it is and tell you which taxes are applicable.

Remember to factor in foreign exchange rates

Another thing to keep in mind is the foreign exchange rates on your returns. “I had an experience with an investment in Bordeaux wine stored in London. […] It was there as an investment, not to drink, and, unfortunately, when the Brexit vote took place, sterling cratered and when I had to sell the investment, I barely broke even…”

One thing BMP Wealth try and do is always match the base currency with the client. So, think about where you are going to ultimately spend your money and then, where possible, base your investments in that currency.

Doing things in this way helps to remove the currency risk, which is sensible – especially when there are multiple influencing factors.

Get in touch

As Steve has shown, it’s important for US expatriates to get independent advice and guidance. So, if you’re an American expat or considered to be US-connected, get in touch and we can help ensure your investments are not only compliant, but best set up to help you achieve your goals.

Email info@bmpwealth.com or call +852 3975 2878.