FBAR and FATCA for Americans in Portugal: what to report, when, and what counts

FBAR: the $10,000 test

The Report of Foreign Bank and Financial Accounts (FinCEN Form 114) is due from any US person — citizen, green-card holder, US-resident alien — who had a financial interest in or signature authority over foreign accounts whose aggregate maximum balances exceeded $10,000 at any time in the calendar year. It is filed online with FinCEN, not with the tax return.

What counts for an American in Portugal:

• current and savings accounts at any Portuguese bank, including the account opened for the visa;
• brokerage accounts and securities accounts held in Portugal or elsewhere outside the US;
• PPR retirement plans and unit-linked life insurance with cash value;
• joint accounts with a spouse (each spouse reports the whole balance);
• company accounts you can sign on, including a Portuguese unipessoal you own.

The test is cumulative and momentary. Three accounts of 4 000 € each, one day, is a filing. The exchange rate is the Treasury’s year-end rate.

• $10,000 aggregate — not per account — at any moment in the year
• 15 April due date, 15 October automatic extension, no request needed
• Six years of FBARs in a streamlined catch-up filing
• No tax is computed on the FBAR; it is a disclosure

Form 8938: FATCA’s higher bar for residents abroad

Form 8938 (Statement of Specified Foreign Financial Assets) is attached to the 1040. For a taxpayer whose tax home is abroad — which you are once you live in Portugal — the thresholds are:

Taxpayers living in the US report from $50,000 / $75,000 ($100,000 / $150,000 joint). “Specified foreign financial assets” are wider than FBAR accounts: they include shares in a Portuguese company held directly, foreign pension entitlements, foreign bonds and notes, and interests in foreign funds. They do not include property held directly, or accounts at the Portuguese branch of a US bank. Both forms are often required for the same account; each is filed on its own.

Portuguese reporting in the other direction

Portugal signed a FATCA intergovernmental agreement in 2015. Portuguese banks identify US persons at account opening (the W-9 they ask for is the sign) and report balances and income to the Portuguese tax authority, which forwards them to the IRS every year. Portuguese banks may decline US clients for that reason; the large banks accept them. In parallel the IRS receives nothing about accounts you keep in the US from Portugal — but Portugal receives US account information under the Common Reporting Standard reciprocity and expects to see the same income in annex J of your Portuguese return.

The fund trap: PFICs

Any non-US mutual fund or ETF — the Portuguese bank’s own funds, a European UCITS ETF, a unit trust — is a passive foreign investment company for the IRS once 75 % of its income is passive or 50 % of its assets produce passive income, which describes every retail fund. A PFIC is reported on Form 8621 per fund per year and, without a timely election, gains and distributions are taxed at the top ordinary rate with an interest charge for each year of holding. The practical rule for Americans in Portugal: keep funds in a US brokerage in US-domiciled ETFs, hold individual shares and bonds here if you want a local account, and never buy a fund from a Portuguese bank without asking a US preparer first.

If you have never filed

The Streamlined Foreign Offshore Procedures exist for exactly this: a US person living abroad who did not file returns or FBARs through non-wilful conduct files the last three tax returns, the last six FBARs, pays the tax and interest, and signs a statement of non-wilfulness. No failure-to-file, accuracy or FBAR penalties are charged. The procedure must be started before the IRS contacts you.

The calendar for an American resident of Portugal

Questions