What Foreign Expats in U.S. Have That American Expats Don’t

An HSBC report finds that Americans found it harder to organize their finances abroad

FATCA can make life difficult for Americans living abroad. FATCA can make life difficult for Americans living abroad.

Expats living in the United States enjoy greater financial comfort than U.S. expats living abroad, according to a recent HSBC survey.

Financial findings from the report, "Expat Explorer: Balancing Life Abroad," revealed key differences between expats living in the U.S. and U.S. citizens living abroad.

According to the report, expats living in the U.S. benefit from higher net incomes. The report finds that, among expats living in the U.S., 27% make less than $60,000 a year, 26% earn $61,000 to $100,000 and 40% make more than $101,000.

Meanwhile, the story is flipped for U.S. expats living abroad, with 46% making less than $60,000, 17% earn $61,000 to $100,000, and 28% earn more than $101,000.

The report also finds that Americans in particular found it harder to organize their finances abroad (38%). Meanwhile, a number of expats living in the United States (39%) report that setting up their finances became easier.

It’s important to note that nearly three-quarters (74%) of  all expats say at least one part of their finances has become more complex living abroad, whether that concerns new currencies, taxes or moving money abroad.

“With three out of four expats finding some part of personal finances more complex, the expat life clearly brings with it personal benefits as well as many complications, often times from unfamiliar financial regulations and tax obligations,” Jacques Herman, head of international retail banking and wealth management at HSBC Bank USA, said in a statement.

For American expats, some of their financial struggles may be in part from the Foreign Account Tax Compliance Act, which aims to ensure that Americans living overseas pay their fair share of U.S. taxes.

Signed into U.S. law on July 1, 2010, FATCA took effect in July 2014. The first international exchange of taxpayer information between the IRS and foreign financial institutions, which is part of the IRS’ overall efforts to implement FATCA, took place in late September.

The information exchange involves certain intergovernmental agreements that not only enable the IRS to receive information from foreign financial institutions but also enable more efficient exchange by allowing a foreign tax administration to gather information and provide it to the IRS.

Many critics and expatriates argue FATCA is a compliance headache that often makes it difficult for Americans living abroad to maintain legitimate bank accounts — and curbs banks’ willingness to serve expats.

Herman notes another important challenge for American expats abroad that can complicate their finances is they are more likely to move back home compared with their expat counterparts.

“An important trend is that they do tend to come home,” Herman told ThinkAdvisor in a phone interview. “Where we see people that move to the U.S. tend to stay longer, so they may decide to be more entrenched into the financial system here.”

This can complicate American expats' ability to organize their finances.

Herman said American expats need to answer questions like, “Where should they be keeping their wealth? What is your time horizon for living here?”

If they don’t plan to stay abroad for long, this could influence where they keep their money.

“It may be a reason why to keep their wealth in the U.S. and not keep their wealth abroad,” he said.

Herman, whom himself has lived abroad, says it used to be common for expats to get “the full package” from employers – which he says included things like accommodation, trips home, education and other benefits.

That’s changed, though.

“What we’re seeing is only about a third of expats are getting that,” he said.

So it falls on the expats to sort out their own accommodations, finances and the like.

“One thing is clear more of this burden is dumping on expats.”

HSBC’s Expat Explorer report is an independent consumer research study based on an online global survey completed by 21,950 expats across the world in March, April and May 2015.

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