Building Wealth as an American in Europe: U.S. Tax Traps & Smart Structure

Saving and investing while American and abroad starts from one structural fact: the United States taxes its citizens and resident aliens on worldwide income, wherever they live. The Internal Revenue Service states it plainly - "You must pay U.S. income tax on your foreign income regardless of where you reside if you are a U.S. citizen or U.S.resident alien." Whatever you build in Europe, you build inside that rule.

This article is aimed at US citizens and US-connected families living in France, Switzerland, Portugal or the Netherlands who are still accumulating — earning, saving and investing - rather than drawing down. It is about structures and reporting, not investments: it recommends no product, no allocation and no provider, and it assumes no rate of return anywhere.

This article describes how United States federal tax law and the relevant income tax treaties and totalization agreements apply to US persons. It summarises French, Swiss, Portuguese and Dutch rules only as published by each country's tax and social security authorities, for context, and is not French, Swiss, Portuguese or Dutch tax, legal or succession advice - those questions belong with a professional qualified in the relevant country.

The architecture question: which country taxes what while you save

While you accumulate, two systems tax the same savings each year: the local system of the country you live in, and the US system that never left. The local side differs sharply across the four countries of this series, which is why the country deep-dives exist - and why nothing in one country's analysis can be carried to another.

In one paragraph, the contrasts: France taxes investment income through a flat prélèvement forfaitaire unique of 12.8%plus social levies - 17.2% on 2025 income, with an 18.6% general rate on investment income from 1 January 2026 - or, on election, through the progressive barème. Switzerland splits the income tax across Confederation, canton and commune - the federal maximum rate is 11.5%, cantonal rates vary an dare not stated here, and wealth tax is cantonal. Portugal applies a flat 28% to interest, dividends and gains, with an option to aggregate into the progressive table instead. And the Netherlands does something different in kind: Box 3taxes a deemed return on the value of savings and investments - for 2026, 6.00%on investments, at a 36% rate above a €59,357 allowance - rather than the actual income, under a regime that is itself in legislated transition. Each figure carries its year; each country's mechanics live in its own articles.

The treaty layer is just as varied - the four income tax treaties allocate pension and investment income in four different patterns, and this series' companion piece on globally mobile professionals sets them side by side. For accumulation, the practical point is simpler: before comparing products or returns, an American in Europe compares structures - because the same euro saved in two different wrappers can produce two very different pairs of tax returns.

The PFIC rules shape the portfolio before anything else

The single most consequential US rule for an American investing in Europe is the passive foreign investment company regime - IRC §§1291–1298, reported on Form 8621. A foreign corporation is a PFIC if 75% or more of its gross income is passive, or if at least 50% of its assets, on average, produce passive income. A foreign-domiciled pooled fund organised as a corporation will typically meet one of those tests.

That general characterisation - it is not an IRS statement about any named fund - is why the ordinary European route to diversified investing, a local or EU-domiciled fund platform, so often collides with the US return. The default §1291 regime taxes "excess distributions" with a separate tax and interest charge allocated over the holding period, and Form 8621 is filed per shareholder, per PFIC. Theme chanics, the elections that can apply, and what they mean for a portfolio are worked through in the dedicated PFIC piece in this library's companion series - this article's job is only to put the constraint first, where it belongs.

The same constraint explains a second recurring theme: many Americans in Europe keep US-domiciled investment accounts precisely because US-registered funds are not foreign corporations. Whether a particular US brokerage will keep serving a European address is an operational question — some restrict or close expatriate accounts - and the companion article on US brokerage access covers it; nothing here recommends any platform. What matters for the architecture is that the domicile of the fund, not the currency on the statement, decides which US regime applies.

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US retirement accounts while you are abroad: the eligibility trap

A 401(k) with a former employer keeps its US tax character while you live in Europe. New contributions are where the trap sits: IRA and Roth IRA contributions require taxable compensation, and IRS Publication 590-A excludes from compensation "any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs."

The consequence is a genuine either-or. The foreign earned income exclusion - $132,900 for 2026 on Form 2555 - can remove earned income from US tax; but earned income excluded that way does not count as compensation for IRA purposes. An American in Europe who excludes everything may have nothing left to contribute against. Whether to exclude, credit foreign taxes instead on Form 1116, or combine the two, is a modelling exercise across both returns - the "exclude or contribute" question belongs with a US tax professional who can run it on your numbers.

Roth accounts add a second layer. Domestically, a Roth IRA has no lifetime required minimum distributions for its owner, and qualified distributions are defined by statute. Across a border, however, the four treaties of this series never mention the word "Roth" in their distribution rules, so how a residence country treats Roth money is an open, country-by-country question — the country deep-dives say exactly what each located text does and does not address. Roth conversions while abroad raise their own timing questions; the companion piece on Roth conversions for Americans overseas covers that lane, and this article deliberately does not.

The local savings vehicles, named - and where their US answers live

Each of the four countries offers savings vehicles with local tax advantages, and each vehicle acquires a second life on a US return the moment a US person holds it. This series treats every one of them in its country context; here they are named once, with a pointer, because the accumulation decision is usually where the question first arises.

In France, the assurance vie and the PER carry French tax features the IRS has never addressed by name - the France cornerstone article works through the statutory tests and reporting that apply instead. In Switzerland, Pillar 3a's CHF 7,258 / CHF 36,288 limits (amounts in force from 2025, unchanged as published) sit alongside an entirely unresolved US characterisation - the Pillar 2 and Pillar 3a article maps the checklist a US professional applies. In Portugal, no located IRS or Autoridade Tributária textnames US treatment for local savings products, and Portuguese bank, brokerage and fund accounts map to the ordinary US reporting categories - the Portugal articles carry what is verified. In the Netherlands, the third-pillar lijfrente and every Box 3 asset class are covered in the Netherlands pieces, deemed-return figures and all. One rule spans all four: a local tax advantage never confers a US one.

Whatever the wrapper, the reporting stack follows. FinCEN Form 114 (FBAR) is triggered once foreign financial accounts exceed $10,000 in aggregate at any point in the year; Form 8938's thresholds for taxpayers living abroad are $200,000/$300,000 (single or separate) and$400,000/$600,000 (joint); and both regimes expressly reach insurance and annuity contracts with cash value. The detailed reporting mechanics live in the companion FBAR and Form 8938 article and in each country's orientation page.

Currency, estate and the pieces that live elsewhere

Two accumulation questions this article deliberately leaves to their own lanes: currency and estate. Currency first - earning in euros or francs while measuring retirement in dollars, or there verse, is a planning dimension of its own, and the companion piece on currency for Americans in Europe owns it entirely; this article only flags that the question exists from the first month of saving abroad, not the last.

Estate second: US estate tax meets four different succession laws in this cluster, and the estate lane - the 2026 estate tax overview and the mixed-nationality couples piece - carries the figures and mechanics; the country articles in this series add only what each country's own sources state, and this one adds nothing beyond the pointer.

The working team for an accumulating household is the same one this series names throughout: a US tax professional(CPA or Enrolled Agent) with expatriate experience, the relevant local professional - a French notaire or expert-comptable, a Swiss fiduciaire/Treuhänderor Steuerberater, a Portuguese contabilista certificado, a Dutchbelastingadviseur - and, where investments are involved, an adviser who works on both sides of the Atlantic. Structure is decided before products; that ordering is the whole argument of this article.