Americans are moving to Europe in numbers not seen in recent memory. The draw is real and well documented: a different pace, a different relationship between work and life, the cultural depth of cities that have been building themselves for centuries, and in many cases a cost of living that, despite the persistent myth that Europe is expensive, compares favorably to the major American metros where many of these migrants are coming from.

What is considerably less well documented, and considerably more consequential for the people making the move, is what happens to the financial life they bring with them.

Moving to Europe as an American is not the same as moving between states. It is not even the same as moving between financial systems. It is the entry into a genuinely dual financial existence, one governed simultaneously by two separate tax authorities, shaped by two separate regulatory frameworks, and complicated by the fact that the assets, accounts, and investment vehicles built for one system do not always behave as expected when the person who owns them is living in another.

The Tax Obligation That Follows You

The United States operates one of the most unusual taxation systems in the developed world. Almost every other country taxes residents based on where they live. The United States taxes its citizens based on who they are, regardless of where they live. An American who moves to Ireland, Portugal, France, Italy, Greece, or any other European country does not leave the American tax system behind. They carry it with them.

This means that an American living in Europe remains obligated to file an annual income tax return with the Internal Revenue Service, reporting worldwide income, regardless of whether any of that income was earned in the United States. It also means compliance with two specific reporting frameworks that govern foreign financial accounts, one that requires the direct reporting of accounts held at foreign financial institutions above a defined threshold, and another that mandates foreign financial institutions themselves to report the accounts of their American clients to US authorities. These obligations do not cease at the point of departure from the United States. They continue, indefinitely, for every year the person remains a US citizen.

Simultaneously, establishing residency in a European country, as any person intending to live there permanently will eventually do, creates a second tax reporting obligation in the country of residence. Most European countries tax residents on their worldwide income, mirroring the American framework, though the specific rules, rates, treaty provisions, and exemptions vary considerably by country. The result is a financial life governed by two tax authorities at once, each with its own definitions of income, its own filing requirements, and its own treatment of the assets and investments the individual holds.

Most Americans who make this move discover the full implications of this arrangement not before they leave but after they arrive.

Why Keeping Your Investments in the United States Is the Right Decision

One of the most common questions American expatriates ask when they settle into European life is whether they should move their investments to a European financial institution. The answer, in the overwhelming majority of cases, is that they should not, and understanding why requires a clear picture of the landscape on both sides of that decision.

European financial institutions, for all their sophistication in serving European clients, present a specific and well-documented set of difficulties for Americans. Many European banks and brokerage platforms simply decline to open accounts for US citizens, due to the compliance burden that American regulatory frameworks impose on any institution that holds accounts belonging to American clients. Those frameworks require foreign financial institutions to report their American account holders directly to US authorities, a requirement that many European institutions find sufficiently burdensome to conclude that the relationship is not worth establishing in the first place. An American who arrives in Europe expecting to seamlessly transfer their financial life to a local institution frequently discovers that the local institution is not prepared to receive them.

The investment vehicles available through European institutions also carry a specific and adverse tax consequence for American investors. Investment funds domiciled outside the United States are classified under the American tax code in a way that subjects any gains from those investments to a punitive tax treatment, transforming what would otherwise be a straightforward investment outcome into a considerably more expensive event. The American investor who moves their portfolio into locally available European funds may find that the tax cost of doing so far exceeds any practical benefit gained from the proximity of the institution managing them.

The more coherent approach, and the one that serves most American expatriates far more effectively, is to maintain investment assets within American institutions and American-domiciled vehicles while addressing the specific consequences that European residency creates for how that portfolio’s income is treated.

Chief among those consequences is the treatment of dividends. An American investor living in Europe receives dividends from their US portfolio as a resident of a European country, which means the country of residence may assert the right to tax that income according to its own framework. The interaction between what the United States withholds on dividend income paid abroad and what the European country of residence expects to collect on the same income creates a coordination problem that requires deliberate management. Where a tax treaty exists between the United States and the country of residence, its provisions govern how this overlap is resolved. Where the specifics of the treaty are not being actively applied to the investor’s situation, the result is frequently either a redundant tax burden or a compliance exposure that the investor is unaware of until it becomes a problem.

This is precisely the coordination that most investors living across two systems do not have and cannot obtain from an advisor who understands only one side of the picture.