Banking in Europe as an American: FATCA, FBAR and Form 8938 Explained

Can a US citizen open a bank account in Europe? Yes, but expect friction, and expect paperwork afterwards. Under FATCA, foreign banks report on accounts held by US taxpayers, and the US Government Accountability Office found that foreign financial institutions "closed some U.S. persons' existing accounts or denied them opportunities to open new accounts" after the law was passed. Once you do hold an account abroad, the reporting duty is yours as well: you must file an FBAR if the combined value of your foreign financial accounts exceeds $10,000 at any time in the year, and Form 8938 if your foreign assets cross higher thresholds — for a single filer living abroad, more than $200,000 on the last day of the tax year or more than $300,000 at any time, according to the IRS.

None of this makes a European account a bad idea. It means choosing the bank is the second question; knowing what you will owe the US Treasury in paperwork is the first.

Why some European banks hesitate

The Foreign Account Tax Compliance Act, passed as part of the HIRE Act, "generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding". The IRS adds that the reporting institutions include not only banks but also investment entities, brokers and certain insurance companies.

To report, a bank first has to identify you as a US person, which is why account-opening forms ask whether you are a US citizen or tax resident. For some institutions, the cost of that work outweighs the value of the customer. In its April 2019 report GAO-19-180, the GAO found that foreign institutions had closed or refused accounts for US persons because of the increased costs and risks of FATCA reporting, and that annual approvals of renunciations of US citizenship rose from 1,601 to 4,449 between 2011 and 2016, attributed in part to those difficulties.

"US person" is wider than "US citizen". For FBAR purposes it includes US citizens, resident aliens, trusts, estates and domestic entities, so a green-card holder moving to Europe is in the same position.

If you live in the EU, you have a lever

If you are legally resident in an EU country, the Payment Accounts Directive gives you a right to a basic payment account, and a bank may refuse it only on narrow grounds: anti-money-laundering rules, already holding a similar account in that country (where national law allows the refusal), and limited cases set by national law. Nationality is not one of them, and Article 15 of the Directive forbids banks from discriminating against consumers legally resident in the EU by reason of their nationality when they apply for a payment account. A refusal must be explained in writing.

That right covers a basic account, not a savings or investment account, and it helps only if you are legally resident in the EU. The full rules, deadlines and refusal grounds are in the right to a basic bank account in the EU.

What you must report: FBAR and Form 8938

The two filings overlap but are not the same. The IRS states that the Form 8938 requirement "does not replace or otherwise affect" the obligation to file an FBAR, and certain foreign accounts are reported on both forms.

Source: the IRS comparison of Form 8938 and FBAR requirements and FinCEN.

The $10,000 test is cumulative

The FBAR threshold is the total across all your foreign accounts, not a per-account limit. The IRS gives the example directly: if you have two accounts with a combined balance greater than $10,000 at any one time, both accounts must be reported. A euro current account and a euro savings account that together briefly pass the line on payday both go on the form, even if each stays small.

The IRS also says to use periodic account statements to find each account's maximum value in its own currency, then convert to US dollars at the end-of-year exchange rate.

What is and is not reportable

From the same IRS table: deposit accounts at foreign financial institutions are reportable on both forms. An account at a foreign branch of a US financial institution goes on the FBAR but not on Form 8938, while an account at a US branch of a foreign institution goes on neither. Foreign currency you hold directly in cash, and foreign real estate you hold directly, are reportable on neither form.

Whether a particular app or e-money account counts as a foreign financial account depends on who holds it and where. Check the form instructions, or ask a tax adviser, rather than assuming.

The cost of getting it wrong

For Form 8938, the IRS lists a penalty of up to $10,000 for failure to disclose, plus up to $10,000 for each 30 days of non-filing after an IRS notice, to a maximum of $60,000. FBAR civil penalties are adjusted annually for inflation, and for both forms the IRS notes that criminal penalties may also apply.

Income tax still follows you

Holding a European account does not change where you pay tax. The IRS states that for US citizens and resident aliens the filing rules are "generally the same whether you are in the United States or abroad", and that you are taxed on worldwide income. If you live overseas on the regular due date, you get an automatic two-month extension to 15 June to file your return, although interest runs on any tax not paid by the regular due date.

If you have lived abroad and missed FBARs or returns, the IRS describes streamlined filing compliance procedures for non-resident US taxpayers, announced on 26 June 2012, for those who "have recently become aware of their filing obligations and now seek to come into compliance".

A practical sequence for Americans moving to Europe

• Keep a US account open. It is the account your US income, card bills and tax payments already run through, and it is not a foreign account for FBAR purposes.

• Expect to be asked whether you are a US person. Answer accurately; a mismatch creates problems later.

• Apply to a bank in the country where you are legally resident. If you are refused a basic account there, ask for the reason in writing and use the complaint route.

• Track your highest balances. Keep the statements that show each foreign account's maximum value during the year; you will need them for the FBAR.

• Compare the cost of moving dollars to euros. Your bank's exchange rate and fee against a specialist such as Wise, before you convert a large sum. Our guide to the cheapest international transfers explains how to compare them.

For the bank itself, the best banks in Europe compares the online and traditional options and the deposit scheme behind each, and bank accounts for expats covers the order of steps when you relocate.

Frequently asked questions

Can US citizens open bank accounts in Europe?

Yes. Some banks decline US persons because of FATCA reporting costs, but many accounts are open to them. If you are legally resident in an EU country, the right to a basic payment account means a bank cannot refuse that account because of your nationality.

Do I need to file an FBAR for a European bank account?

If you are a US person and the combined value of all your foreign financial accounts exceeded $10,000 at any time during the calendar year, yes. The FBAR is filed electronically with FinCEN, not with your tax return.

What is the difference between FBAR and Form 8938?

The FBAR is a FinCEN report with a $10,000 aggregate threshold. Form 8938 is filed with your tax return and has higher thresholds — for a single filer living abroad, over $200,000 at year end or over $300,000 at any time. Certain accounts go on both.

Is a joint account with my spouse reportable?

FinCEN treats an individual who personally owns, or jointly owns with a spouse, a reportable foreign account as an FBAR filer, and it publishes separate guidance on reporting jointly held accounts and filing for a spouse. Check it before you file.

When is the FBAR due?

It must be received by 15 April, with an automatic six-month extension to 15 October.

This is general information, not tax or legal advice. US reporting rules are detailed and change; confirm your own position with the IRS instructions or a qualified adviser.