Investing as an American in Portugal is possible, but most of the usual routes are closed. The funds domiciled here are PFICs for US tax, and EU rules stop European brokers selling you US ETFs. What works is a short list: individual shares, bonds and Treasuries through a broker that accepts Americans abroad, US retirement accounts left where they are, and advice from someone licensed to act for US citizens.
More Americans are moving to Portugal every year, and US citizens are now the leading nationality for investment residence permits. Many of them learn the same lesson within months. A common view is that “most banks here have a brokerage, and some even offer US ETFs, so what’s the problem?” The problem is that buying what a Portuguese bank offers can leave a US citizen with a punitive tax bill and years of extra IRS paperwork.
This guide to investing as an American in Portugal explains why, what you can do instead, and the questions to ask before you invest.
In brief
- Most funds sold in Portugal, including UCITS ETFs, are PFICs for US tax purposes.
- European brokers cannot sell US-domiciled ETFs or mutual funds to retail investors.
- Individual shares, bonds and US Treasuries remain open to you through the right account.
- Keep your IRA and 401(k) in the US, and take advice before drawing on them.
- US reporting continues wherever you live, alongside a Portuguese tax return.
Do US citizens pay taxes in Portugal?
Yes. Once you are tax resident in Portugal, you pay Portuguese tax on your worldwide income. You also keep filing a US return, because the US taxes its citizens wherever they live.
The US–Portugal tax treaty and foreign tax credits exist to stop you paying full tax twice. The order in which each country taxes and credits your income matters, however. Getting it wrong is the most common and most expensive mistake we see.
Why investing as an American in Portugal is harder
Three sets of rules collide:
- US citizenship-based taxation. Moving abroad does not end your US tax obligations.
- FATCA. Foreign banks and brokers must report American account holders to the IRS. Many European firms refuse US clients, or restrict what they can buy, rather than take on the compliance burden.
- EU investor protection rules (PRIIPs and MiFID II). Brokers cannot sell a fund to retail investors without a standard Key Information Document. US fund providers generally don’t produce one, so European brokers cannot offer you US ETFs or mutual funds.
The result is a narrow set of investments that work on both sides of the Atlantic.
What is a PFIC, and why does it matter?
A Passive Foreign Investment Company (PFIC) is a US tax term that catches almost every non-US pooled investment. That includes European mutual funds, UCITS ETFs, investment trusts and the funds sold by Portuguese banks.
Without a valid election, the IRS taxes gains and some distributions at the highest US income tax rate rather than capital gains rates, and adds an interest charge for each year you held the fund. Each PFIC usually needs its own Form 8621 every year. The elections that soften these rules are rarely practical for European funds.
For anyone investing as an American in Portugal, almost every fund on offer here will be a PFIC, so ask where a fund is domiciled before anything else.
The same applies to insurance-wrapped investments. Portuguese compliant bonds work very well for many British and European nationals. They usually hold non-US funds, and are generally not suitable for US taxpayers.
Can an American living in Portugal buy ETFs?
Not in the way you could at home. Try to buy a US-listed S&P 500 ETF through a Portuguese bank or a European trading app and the platform will usually refuse the order. European UCITS versions of the same index are available, but they are PFICs.
There is one legitimate route. Under MiFID II you can ask to be treated as a professional client if you meet two of three tests:
- a portfolio above €500,000
- frequent trading of significant size, around ten trades a quarter
- at least a year’s professional experience in financial services
Professional status can open access to US ETFs, but you give up some retail investor protections. It should be a considered decision made with a regulated adviser, not a workaround.
What brokerage options are best for US citizens in Portugal?
In practice, the options for investing as an American in Portugal are:
- A US-based international account designed for Americans living abroad. A small number of US brokers offer these. They let you hold individual US shares, bonds, Treasuries and ADRs with normal US tax reporting, although US funds and ETFs may not be available.
- An existing US brokerage account, if your broker lets you keep it after you move. Many restrict trading or close accounts once they learn you live abroad.
- Professional client arrangements through a regulated cross-border adviser, which can give larger portfolios access to US ETFs and managed portfolios.
- Portuguese bank accounts for everyday cash, which you report to the IRS where required.
Can I keep my US brokerage account if I move to Portugal?
Sometimes, but do not keep a friend’s or relative’s US address on file to hold on to it. That is misrepresentation, and it rarely lasts. Brokers re-check client addresses from time to time, and if yours finds you have moved, it can restrict or close the account at short notice. That can force you to sell at a bad moment and leave you with a tax bill you had not planned for.
What happens to my IRA, Roth IRA and 401(k)?
Existing US retirement accounts can generally stay where they are, and usually should. Moving them into a European pension or investment product rarely helps and can create new PFIC and reporting problems.
Before your first withdrawal as a Portuguese resident, we check three things: which account the money comes from, which country the US–Portugal treaty allows to tax it, and how the timing affects both your US and Portuguese returns. Portugal does not automatically follow US treatment, so a Roth withdrawal that is tax-free in the US is not necessarily tax-free here. The NHR regime closed to new applicants from 2024. Its replacement, IFICI, is aimed at specific professions and does not replicate NHR’s treatment of pensions. If you already hold NHR, see what happens when your NHR status ends.
How does Portugal tax investment income?
For Portuguese residents, Portugal generally taxes interest, dividends and capital gains at a flat 28%, or you can choose to add them to your other income. Income from jurisdictions on Portugal’s tax blacklist faces a 35% rate; see my guide to the Portugal tax blacklist. You declare foreign income on Annex J of your Portuguese IRS return.
US reporting for Americans investing in Portugal
Whatever you invest in, the IRS expects these returns:
- FBAR (FinCEN Form 114): required if your non-US accounts, including Portuguese bank accounts, together exceed $10,000 at any point in the year.
- Form 8938 (FATCA): for Americans living abroad, required above $200,000 at year end or $300,000 at any time for single filers. For married couples filing jointly the thresholds are $400,000 and $600,000.
- Form 8621: one for each PFIC you hold.
Penalties for missing these forms can be severe, even when no tax is due.
Estate planning for Americans investing in Portugal
Estate planning is easy to overlook when investing as an American in Portugal. US citizens remain subject to US estate tax on their worldwide assets wherever they live, although the exemption is large. Portugal has no inheritance tax as such. Stamp duty of 10% applies to assets passing to anyone other than a spouse, children or parents.
Check whether your US will works in Portugal and whether you need a Portuguese will. You should also check how the EU Succession Regulation applies to you; see my guide to Brussels IV in Portugal. Review the beneficiary and designations on your US accounts against your new residence.
Seven questions to ask before investing as an American in Portugal
- Is the adviser authorised to advise US persons, and by which regulator?
- Is anything in this proposal a PFIC?
- Will I receive US tax reporting, such as Form 1099, for this account?
- Is the account opened with my real Portuguese address?
- What are the total annual costs, including any product charges?
- How will this income be taxed in Portugal and in the US, and in which order?
- What happens to this account on my death, and in which country?
If an adviser cannot answer these clearly, keep looking.
Investing as an American in Portugal: frequently asked questions
Can Americans in Portugal invest in UCITS ETFs?
You can, but almost all UCITS ETFs are PFICs, so they are rarely a good idea for US taxpayers.
Do I have to report my Portuguese bank account to the IRS?
Yes, on an FBAR if your non-US accounts together exceed $10,000 at any time in the year, and possibly on Form 8938.
Are Portuguese compliant bonds suitable for Americans?
Generally not, because the underlying funds are usually PFICs.
Can I invest my 401(k) from Portugal?
Your existing 401(k) can usually stay invested in the US. Take advice before rolling it over or making withdrawals as a Portuguese resident.
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This article is general information, not personal advice. While care has been taken to ensure the information in this article is accurate at the time of publication, laws and regulations may change. This content should not be relied upon as a substitute for personalised professional advice. Always seek guidance based on your specific circumstances.
