Investing in Finland as a US citizen?

[Xlar]

Was wondering if anyone had advice on how to invest in Finland as a US citizen? Would like to invest in something like the S&P 500. Can either invest in Euros or exchange and invest with USD.

[reeshau]

Do you still have a US presence / address?  US accounts?

When you talk about mutual fund investing, beware of the PFIC definition.  That will get you saddled with punitive tax and complex US tax reporting.  It's actually easier, from a tax perspective, to invest directly in company shares.  (Most companies, anyway.  Some also are PFICs)

I lived in Ireland for 2 years.  I had my US accounts.  While I have a pension account in Ireland, I just sent my surplus cash home to invest.

Frequent recommendations are to look into an account with Schwab or Interactive Brokers, who are "friendly" to US expats.

[Radagast]

Think I’d go iShares Finland ETF EFNL. ER 0.55% but easy.

[maizefolk]

@Xlar right now I think your question can be read with two different meanings which is why you've got only two answers and they are really different ones.

Are you asking how to invest in the finnish economy and are looking for the S&P 500 equivalent for Finland?

Or are you an american living in Finland who would would to invest in stocks generally as an expat?

[MustacheAndaHalf]

Just to underscore reeshau's comment, a tax attorney's website mentions the following:

"The consequences of owning a PFIC are severe.  The IRS estimates it takes up to 30 hours of tax preparation time to complete Form 8621, which needs to be filed for each PFIC every year.  As a result, the benefit of holding a PFIC often outweighs even the cost of reporting it."
https://patellawoffices.com/blog/planning-for-tax-minimization/watch-out-for-pfic-status-2/

So while you could in theory use IBKR to invest directly in Finland's stock market, I think you're asking for a lot more trouble than you realize.

[Juan Ponce de León]

Just get an IBKR account and literally buy whatever you want.

[FLBiker]

Re: PFICs -- I'm no expert on Finland, but here in Canada, Canadian mutual funds and ETFs are generally a no-go if I want to avoid PFIC filings (which I do).  Here (at least) I don't need to worry about them in tax sheltered accounts, but in my taxable I stay away.  I keep my taxable in US dollars, in US domiciled ETFs.  Now that I'm getting paid in Canadian dollars, I may add some individual Canadian stocks in my taxable (in Canadian dollars) as those don't trigger PFIC requirements.  First, though, I'm planning to pay off my house as I'm in no hurry to get into the individual stock picking game.

[Xlar]

Do you still have a US presence / address?  US accounts?

When you talk about mutual fund investing, beware of the PFIC definition.  That will get you saddled with punitive tax and complex US tax reporting.  It's actually easier, from a tax perspective, to invest directly in company shares.  (Most companies, anyway.  Some also are PFICs)

I lived in Ireland for 2 years.  I had my US accounts.  While I have a pension account in Ireland, I just sent my surplus cash home to invest.

Frequent recommendations are to look into an account with Schwab or Interactive Brokers, who are "friendly" to US expats.

Good to know about PFICs! My hope it to be able to invest in the S&P 500 directly. I will look into Schwab and Interactive Brokers.

I might be able to use a USA address but I would rather not if possible.

[Xlar]

@Xlar right now I think your question can be read with two different meanings which is why you've got only two answers and they are really different ones.

Are you asking how to invest in the finnish economy and are looking for the S&P 500 equivalent for Finland?

Or are you an american living in Finland who would would to invest in stocks generally as an expat?

American living in Finland and ideally want to invest in USA stocks. Not interested in Finish stocks since they are so small (globally speaking)

[Xlar]

Just to underscore reeshau's comment, a tax attorney's website mentions the following:

"The consequences of owning a PFIC are severe.  The IRS estimates it takes up to 30 hours of tax preparation time to complete Form 8621, which needs to be filed for each PFIC every year.  As a result, the benefit of holding a PFIC often outweighs even the cost of reporting it."
https://patellawoffices.com/blog/planning-for-tax-minimization/watch-out-for-pfic-status-2/

So while you could in theory use IBKR to invest directly in Finland's stock market, I think you're asking for a lot more trouble than you realize.

Definitely want to avoid PFICs then, that sounds like a nightmare!

Just get an IBKR account and literally buy whatever you want.

By IBKR do you mean Interactive Brokers? Can you open an account without a USA address?

[reeshau]

To be clear, just about any foreign mutual fund or ETF is designated a PFIC by the US.  Thus, my recommendation to invest directly in company shares.  Or, you end up needing to invest in US funds.

https://www.alienmoolah.com/yes-your-foreign-mutual-funds-and-etfs-are-pfics/#:~:text=If%20you%20pay%20attention%20you,are%20PFICs%20for%20tax%20purposes.

In a very ironic twist, you can invest in PFICs in your US retirement accounts.  (IRAs and 401ks)

https://www.mondaq.com/unitedstates/tax-authorities/563954/irs-issues-final-regulations-on-pfics

You do, however, lose the ability to claim foreign tax credits on shares held in those accounts.

[FLBiker]

If you just want to invest in US index funds, can you find a Finnish brokerage that allows you to hold USD, US-domiciled funds?  That's what I do in Canada.  I just invest in VTI and VXUS through a Canadian brokerage, in US dollars.

[Xlar]

If you just want to invest in US index funds, can you find a Finnish brokerage that allows you to hold USD, US-domiciled funds?  That's what I do in Canada.  I just invest in VTI and VXUS through a Canadian brokerage, in US dollars.

That does seem like the easiest solution but I haven;t found a finnish/EU brokerage that will allow me to open an account since I am a US citizen. It was hard enough getting a normal bank account due to FATCA... Seems like most financial institutions don't want to deal with the extra hassle.

[reeshau]

If you just want to invest in US index funds, can you find a Finnish brokerage that allows you to hold USD, US-domiciled funds?  That's what I do in Canada.  I just invest in VTI and VXUS through a Canadian brokerage, in US dollars.

That does seem like the easiest solution but I haven;t found a finnish/EU brokerage that will allow me to open an account since I am a US citizen. It was hard enough getting a normal bank account due to FATCA... Seems like most financial institutions don't want to deal with the extra hassle.

You won't be able to, as US funds won't adhere to EU fund regulations, and vice versa.  That's where brokerages like Schwab and IB come in.  They still have to deal with customer data privacy issues, but they offer a window to the other population pool.  Or fund companies like Vanguard, who have EU-domiciled funds for the same purposes.

https://www.bankeronwheels.com/vanguard-funds-for-european-investors/

But remember:  for a US citizen, these would be PFICs.

[Xlar]

If you just want to invest in US index funds, can you find a Finnish brokerage that allows you to hold USD, US-domiciled funds?  That's what I do in Canada.  I just invest in VTI and VXUS through a Canadian brokerage, in US dollars.

That does seem like the easiest solution but I haven;t found a finnish/EU brokerage that will allow me to open an account since I am a US citizen. It was hard enough getting a normal bank account due to FATCA... Seems like most financial institutions don't want to deal with the extra hassle.

You won't be able to, as US funds won't adhere to EU fund regulations, and vice versa.  That's where brokerages like Schwab and IB come in.  They still have to deal with customer data privacy issues, but they offer a window to the other population pool.  Or fund companies like Vanguard, who have EU-domiciled funds for the same purposes.

https://www.bankeronwheels.com/vanguard-funds-for-european-investors/

But remember:  for a US citizen, these would be PFICs.

Just to check I understand:
EU-domiciled funds would count as PFICs (bad).
But if I open an account through Schwab or IB I can buy US based funds (good) that are not PFICs?

[reeshau]

Just to check I understand:
EU-domiciled funds would count as PFICs (bad).
But if I open an account through Schwab or IB I can buy US based funds (good) that are not PFICs?

Correct.

I have no idea on how Finland would regard those accounts for tax purposes.  In Ireland, after 5 years as a resident, they wanted to tax assets globally too.  Less than that, and I was careful never to bring back any money earned in the US to Ireland.  I even had a separate US money market account, since Irish rates were negative.  I moved the earned interest out of that account each month.

That has no bearing on what Finland wants, but just an example of how careful you have to be when fending off two tax men.

[Xlar]

Just to check I understand:
EU-domiciled funds would count as PFICs (bad).
But if I open an account through Schwab or IB I can buy US based funds (good) that are not PFICs?

Correct.

I have no idea on how Finland would regard those accounts for tax purposes.  In Ireland, after 5 years as a resident, they wanted to tax assets globally too.  Less than that, and I was careful never to bring back any money earned in the US to Ireland.  I even had a separate US money market account, since Irish rates were negative.  I koved the earned interest out of that account each month.

That has no bearing on what Finland wants, but just an example of how careful you have to be when fending off two tax men.

Good to know, I appreciate your help reeshau!

[NN6]

As a fellow expat in Europe I ran into the same question a while back. Couldn't really find a way to invest in index funds without running into trouble so I ended up opening an interactive brokers account and am stock picking there. If you have a US address you could buy index funds there. Reason why I still chose interactive brokers is that they provide the correct tax documents for the US and filling in the Norwegian taxes by hand is much easier than in the US.

BTW stock picking has not been treating me too well lately compared to the S&P500 but I don't think we really have much of a choice. I guess if you add plenty of big tech to your portfolio the correlation should be high at least.

[yachi]

Just to underscore reeshau's comment, a tax attorney's website mentions the following:

"The consequences of owning a PFIC are severe.  The IRS estimates it takes up to 30 hours of tax preparation time to complete Form 8621, which needs to be filed for each PFIC every year.  As a result, the benefit of holding a PFIC often outweighs even the cost of reporting it."
https://patellawoffices.com/blog/planning-for-tax-minimization/watch-out-for-pfic-status-2/

So while you could in theory use IBKR to invest directly in Finland's stock market, I think you're asking for a lot more trouble than you realize.

As a result, the benefit of holding a PFIC often outweighs even the cost of reporting it.

Usually attorneys are more careful with their words.  That makes it sound like the opposite of what they said in the beginning:

It is not illegal to invest in a PFIC, but practically speaking, the costs of doing it are so incredibly onerous that it’s prohibitively expensive in the vast majority of cases.

They should rephrase it to read:
"As a result, the cost of reporting a PFIC often outweighs any financial benefit of owning it."
or
"As a result, the benefit of holding a PFIC is often outweighed by the cost of reporting it."

[MustacheAndaHalf]

Usually attorneys are more careful with their words.  That makes it sound like the opposite of what they said in the beginning:

It is not illegal to invest in a PFIC, but practically speaking, the costs of doing it are so incredibly onerous that it’s prohibitively expensive in the vast majority of cases.

They should rephrase it to read:
"As a result, the cost of reporting a PFIC often outweighs any financial benefit of owning it."
or
"As a result, the benefit of holding a PFIC is often outweighed by the cost of reporting it."

An owner who doesn't report violates the law, so I disagree there is a meaningful difference.

As a fellow expat in Europe I ran into the same question a while back. Couldn't really find a way to invest in index funds without running into trouble so I ended up opening an interactive brokers account and am stock picking there. If you have a US address you could buy index funds there. Reason why I still chose interactive brokers is that they provide the correct tax documents for the US and filling in the Norwegian taxes by hand is much easier than in the US.

BTW stock picking has not been treating me too well lately compared to the S&P500 but I don't think we really have much of a choice. I guess if you add plenty of big tech to your portfolio the correlation should be high at least.

Have you considered opening a Schwab International account?
https://international.schwab.com/expatriate-essentials

[lutorm]

Fidelity allows you to keep your account if you move out of the US, and to keep trading. You just can't buy mutual funds, but that's apparently not their fault but a US law issue. You can't open a Fidelity account unless you're a US resident, though, and I think many other companies have similar restrictions.