Investments  

How to be a US expat and invest in US equity funds

This article is part of
Guide to US Equities

If you are a US expat looking to invest in equity funds away from home, you may not know where to begin. 

However she warns: “The UK tax authority may subject them to UK punitive ‘non-reporting fund’ tax regime. This may be a huge problem for US citizens or green card holders living in the UK for a long period of time.”

Reporting fund status 

Article continues after advert

Mr Kapadia highlights that it is possible for US citizens or green card holders to invest in US registered funds with UK “reporting fund tax status”. 

Ms Dromantaite shares the same view. 

She says: “These investments will give the best return on investments for the US citizen or green card holder while not subjecting them to US PFIC or UK “non-reporting fund” tax regimes.”

Reporting funds are obliged to report details of their income to their UK resident investors and HMRC whether or not the income has been distributed. 

Conversely, a non-reporting-fund is not required to report details of its income. UK resident investors will only be liable to pay income tax on the income that has been distributed to them from the fund. 

ETFs

Mr Kapadia says there are a number of ETFs that satisfy the “reporting-fund” status that allow for a diversified portfolio. 

He says: “Therefore, although it is a complicated situation, it is not impossible and it is recommended that investors seek the advice of an experienced manager who will be able to guide them every step of the way.”

Mr Poniewaz says US expats can find information about the US funds that are UK-reporting via the HMRC website, which keeps an updated list of these funds.

But he warns that US expats should be aware of recent EU restrictions on Packaged Retailed Investment Products which may restrict their ability to buy those funds. 

PRIIPs regulations, came into effect in January last year and imposed new calculation methodologies and transparency requirements investment products across the EU. 

Mr Poniewaz adds: "The list contains both mutual funds and ETFs. There are both actively managed and index funds on the list."

saloni.sardana@ft.com