Sunday, June 29, 2008

Cross-border banking, taxes, investments (and learning to read)

'Clearing out a few notes of advice before the start of the new week...

Disclaimer: This essay describes my personal knowledge and experiences with cross-border finances. It is not intended to substitute for getting personal advice from a professional advisor. Getting started, I also recommend reading the US-Expatriate-Handbook, available on-line from the West Virginia University College of Business and Economics.

Banking: Some time back, I wrote of the perils of trying to get transfer accounts set up between US and Dutch banks. A change in our company's payroll system required me to set up a US-based direct-deposit system that could transfer monthly stipends out of the US each month. Washington Mutual and CitiBank could not reliably make regular transfers, and neither Fortis nor Barclay had the necessary US connections.

My solution was an HSBC Premier account, their globally linked accounts system. Once I set it up, it has worked work flawlessly with competitive exchange rates. The account requires a hefty minimum balance with HSBC or a monthly fee, but if your company or employer uses the bank, you can probably access the program for much less.

Taxes: The Economist reports that a new law, signed June 16, will require payment of asset penalties if a US expat renounces citizenship in order to avoid double taxation. This comes on top of earlier changes to the law, limiting US credit for foreign taxes paid.

The net effect is to make life more expensive for working expatriates. There are also much greater chances to make a mistake if you try to do your own taxes. My 2007 tax return is the size of a small novel: to the extent that you can negotiate the benefit, support for preparing and offsetting US taxes should be an essential part of an expatriate contract (or local work agreement).

Investments: US anti-terrorism and money-laundering laws have made it impossible to have European share accounts to invest in stocks, bonds, or mutual funds if you are a US citizen. US brokerages have closed offices, and local brokers screen out US expatriates. This makes it hard to make spare money work for you: European checking accounts pay virtually no interest.

Nonetheless, there is an alternative. Time deposit savings accounts, which pay an interest premium for limiting withdrawals, pay over 7% in the UK at the moment, and have very low minimums. (Barclay's Monthly Savings account is typical). And, as long as the dollar is falling, you get a boost by simply holding pounds and euros.

Learning to Read: Although I am still not able to think fast enough on my feet to keep up a conversational Dutch exchange, I am getting more confident by the month at reading and writing. Not surprisingly, children's books are a great source for getting started.

I have purchased used storybooks from the bookseller, either the "checkerboard" books or others of similar heft. Even better have been the WinklerPrins books sold at discount: the Kinder Woordenboek and Encyclopedie have been great. And I always have the Prisma Miniwoordenboek, available at Schiphol bookstores, close to hand.

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