digest
Short Summary
Main recommendation: Americans living in Israel, including US citizens and dual citizens, should consider keeping their investments in a US brokerage account rather than opening one through an Israeli bank, because Israeli bank products can create heavier US tax reporting. The speaker, Doug Goldstein of Profile Investment Services in Jerusalem, presents this as a general discussion and notes that it is not tax advice.
Key Points
- As a US citizen, opening an investment account at an Israeli bank requires signing specific documentation, including an IRS Form W-9.
- Due to FATCA (the Foreign Account Tax Compliance Act), foreign financial institutions, including Israeli banks, must report assets held by US account holders to the IRS.
- Many Israeli bank investment products may be classified by the IRS as PFICs (Passive Foreign Investment Companies), which face more difficult tax reporting than regular US investments.
- Israeli advisors and banks may be trained for Israelis and may not understand the broader situation facing dual citizens, so they could inadvertently sell an inappropriate investment.
- Some US firms reject clients living abroad, but some do serve Americans living overseas.
Details Worth Noting
- Concrete instructions:
- If you are a US citizen considering an investment account, ask your Israeli bank or advisor whether the product is a PFIC before investing.
- If your total foreign assets exceed $10,000 at any point during the year, check with your accountant about FBAR (Foreign Bank Account Report) filing, and include foreign investment account assets on it.
- Consider keeping a US brokerage account, since the speaker says these accounts are easy to maintain from Israel.
- Choose a US brokerage firm that works with Americans living abroad, because some firms refuse such clients.
- Securities are offered through Portfolio Resources Group, and the accounts are carried by Pershing LLC, a member of NYSE and SIPC and a subsidiary of the Bank of New York Mellon Corporation.
- The speaker states the discussion is not tax advice, so specifics should be confirmed with a qualified accountant.
Bottom Line
The choice between an Israeli bank and a US brokerage for Americans in Israel mainly hinges on US tax and reporting obligations, so the speaker's view is that a US account is often the simpler route, subject to professional tax advice.
