American Thinking About Opening a Bank Account Overseas? Here’s What You Need To Know

Moving overseas is a major step. It means stepping into a new culture and environment. Getting settled will likely include finding a local bank to handle your financial affairs. However, doing so might not be so easy in many countries.

Thanks to the Foreign Account Tax Compliance Act (FATCA), many banks overseas are being pressured to share information on U.S. account holders. The original intent was to cut down on Americans looking to evade taxes by hiding money offshore. However, the requirement has forced overseas banks to upgrade their financial systems and put other costly administrative checks in place. The result is that some foreign banks now close active accounts that are owned by U.S. persons. Other banks refuse to open accounts for Americans at all.

open bank account overseas

But wait, there’s more. If you move overseas and are able to open a bank account you must be aware of the Report of Foreign Bank and Financial Accounts (FBAR). If a U.S. person has a financial interest, or signature authority, over accounts outside the United States AND the value of the account(s) is more than $10,000 then an FBAR must be filed. The report is typically due on April 15th (or the personal tax due date) and there is a $10,000 penalty possible for non-willful failure to file it.

Don’t take this lightly. Willful failure to file an FBAR report could result in a penalty of the greater of $100,000 or 50 percent of the balance in the account and could lead to criminal prosecution.

It’s not just bank accounts either that you should be concerned with. Some of the other foreign financial accounts that could trigger an FBAR filing include:

• Trading or brokerage accounts
• Mutual Funds
• Certificate of deposits
• Retirement accounts
• Life insurance policies with a cash surrender value

FBARs are electronically filed with the U.S. Department of Treasury, not the IRS. However, if income is earned from your foreign financial accounts, that income should be included on your tax return.

Opening a bank account overseas can be a challenge. However, if you are aware of the implications and complications you will save yourself a lot of headache, time and money.