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Offshore Investing: What Americans Need To Report  Thumbnail

Offshore Investing: What Americans Need To Report

There can be numerous benefits to holding assets offshore and investing overseas for Americans, such as asset protection, diversification of investments, risk management, privacy, and wealth structure (learn more here: The Benefits of Swiss Asset Management for Americans). However, if you are an American living abroad or if you hold bank/investment accounts outside of the United States, there are special reporting requirements that you are obligated to comply with when filing your U.S. tax return. For this blog, we will focus on Americans living and residing in the U.S. with investment accounts overseas. It is valuable to clearly understand what needs to be reported and to ensure you are following the laws correctly. However, keep in mind that we at WHVP are not U.S. tax specialists and do not offer tax advice, it is therefore always recommended to consult with a CPA or tax lawyer in order to make sure you receive the appropriate information for your specific situation.


For the sake of the blog, a short explanation of the law governing the reporting requirements, we will give a brief summary of the Foreign Account Tax Compliance Act (FATCA). FATCA came into effect to account for funds held abroad by those living and working in the U.S. It's essentially a way for the government to tax foreign
 revenue earned by their citizens and residents. The money collected is earmarked for domestic employment programs.

These factors affect not only individuals but financial institutions as well. If a foreign bank or financial institution has American clients or customers, they must report the value of the accounts to the Internal Revenue Service. Those that do not may face fines and restrictions from the U.S. market. We previously wrote a blog post on the details of FATCA that you can check out to dive more into the nitty-gritty of the law, which you can check out here: Foreign Account Tax Compliance Act (FATCA).

Reporting Requirements 

So who exactly has to report on foreign-held assets, investments accounts, or bank accounts, and are there any exceptions to reporting? FATCA created the 8938 form, which is needed for American taxpayers should they fulfill three criteria; if they are a U.S. citizen or resident (called a specified individual) or a specified domestic entity, and if they hold an interest in "specified foreign financial assets," and if the total value of these foreign assets surpasses the reporting threshold specific to their case.

These thresholds are as follows: for unmarried taxpayers, the total value of specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year; for married taxpayers filing a joint income tax return the total value of specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year, for married taxpayers filing separate income tax returns, the total value of specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year, and Specified Domestic Entities with the total value of specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.1

The requirements are fairly straightforward, but it is important to work with a CPA or tax professional to determine if you must file under the FATCA requirements. Another reporting requirement is the Report of Foreign Bank and Financial Account (FBAR). This is done separately from your tax return filings and is for all foreign accounts if the total is more than $10'000 and is due on the 15th of April each year. It is a critical piece of the reporting requirements for Americans as the IRS takes it seriously, like all tax issues. 

Are There Any Exceptions?

In many cases, if you're reporting money on another tax form, it doesn't need to be reported again on form 8938. Instead, you should advise which forms report the assets.2 The exceptions may include reported assets such as trusts or foreign gifts, foreign corporations, passive foreign investment companies, foreign partnerships, safe deposit boxes, and certain retirement accounts.3 Again, here it is important to say we are not giving any advice and recommend that you speak with a tax professional about your specific situation. 

How We Help

It is vital that our clients have all the correct information about their investment accounts throughout the year, especially come tax season. Because of this, we only partner with private banks that understand the need to provide clear statements on an ongoing basis and provide clear and precise end-of-the-year tax statements for our U.S. clients in a timely manner. Those statements are, of course, in English and denominated in U.S. dollars, so you - or whoever files your taxes for you - have as little additional work as possible. We focus on this to ensure our clients have everything they need with plenty of time to ensure they can report on time with the correct information. If requested, we are also always happy to make introductions to U.S. tax specialists that have relevant experience in regard to cross-border tax issues.

Reporting, Yet Private? 

So is there still value in offshore banking in terms of privacy? Yes, privacy still ranks high for people looking to move money offshore. But isn't this benefit now all gone with the reporting requirements? No, not entirely. Secrecy in regards to tax evasion and towards the government is gone. However, there is still a lot to say about privacy. Your wealth, spending habits, and almost every other detail of your financial life are under scrutiny in the U.S. The U.S. is one of the few nations where it is legal for banks and other financial services to disclose information about your accounts without your permission or without probable cause of wrongdoing. With armies of information brokers, which advertise their ability to uncover assets in search of lucrative victims of frivolous lawsuits, the privacy held in offshore banking still remains highly valuable to those who wish to keep their wealth out of the hands of the public. The fact is that only the people you tell will know you have financial assets offshore. 

Transparency is key to us as we work in a trust-based industry. So while we often speak of the benefits of using a Swiss asset management firm to build your wealth, it is crucial to us to explain the considerations that our clients need to understand and demonstrate that we understand the needs and requirements the U.S. requires of their taxpayers.

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  1. https://www.irs.gov/businesses/corporations/do-i-need-to-file-form-8938-statement-of-specified-foreign-financial-assets
  2. https://www.irs.gov/businesses/corporations/summary-of-fatca-reporting-for-us-taxpayers
  3. https://www.irs.gov/businesses/corporations/basic-questions-and-answers-on-form-8938