U.S. Expats

The Hidden Costs of Claiming the Foreign Earned Income Exclusion

The Hidden Costs of Claiming the Foreign Earned Income Exclusion

Many U.S. expats have learned to use and cherish the Foreign Earned Income Exclusion (FEIE), a provision in the U.S. tax code allowing workers to exclude up to $120,000 (for 2023) of their non-U.S. salary for Federal taxation. If nothing else, the FEIE stands out for its absolute simplicity in an otherwise endlessly convoluted tax code: anyone deriving income from a foreign employer can claim the FEIE by filing form 2555, and there are remarkably few exceptions and caveats. It is one of the few “breaks” that expats get in their otherwise needlessly complex financial lives, so it’s perhaps no surprise that it represents the go-to, default option for most U.S. taxpayers abroad when it comes to avoiding double taxation. For the majority of expats, claiming the FEIE each year will absolutely be the right thing to do. However, in this article I will consider some of the drawbacks of using the FEIE, and consider instances where claiming the FEIE may actually have hidden costs. Once these costs are factored in, the same taxpayer may actually find that claiming the FEIE is not the optimal tax strategy.

Hidden cost #1: Missing out on unused foreign tax credits

Interestingly, many expats who use FEIE don’t actually need it, and could use the mechanism of tax credits to avoid double taxation instead (claiming credits in one country for taxes paid in the other). Expats in high tax jurisdictions in particular probably pay enough in foreign taxes to fully offset any potential U.S. tax liability, even without excluding any income.  Other higher income earners may also use a combination of the two approaches: the FEIE up to the statutory limit, and tax credits for the remainder of their income. The benefit of the tax credit approach is that any unused foreign credit can be rolled over for 10 years, and, therefore, may be used in the future to offset potential U.S. tax liability. While using foreign credits is not always easy (indeed many foreign tax credits end up expiring), certain situations such as moving to a low tax country, or using certain pension withdrawal strategies, may give rise to very attractive opportunities for an expat to capitalize on their unused foreign tax credits. Using the FEIE may reduce or completely eliminate these opportunities.

Hidden cost #2: Losing the ability to contribute to an IRA

Excluding your income from federal taxation sounds great, but if you exclude all of your income, you may be making yourself ineligible for IRA or Roth IRA contributions, which require the presence of employment income as the primary criterion for eligibility. As a result, you could be missing out on the opportunity for tax deferred or even tax exempt growth afforded by IRAs and Roth IRAs. The benefit of making such contributions will vary greatly depending on your personal circumstances and country of residence, and some expats may not benefit from them at all. For a more detailed discussion on IRA contributions for expats please refer to my previous article on the topic: 


Hidden cost #3: not receiving refundable tax credits

For expat parents who may qualify for child care tax credits, using the FEIE may have another hidden cost: it will make you ineligible for the refundable portion of that credit. In practice, this could mean missing out on the opportunity to receive USD $1,400 per child annually paid to you in cash, due to specific tax rules making FEIE claimants ineligible for tax credit refunds. Filers who simply claim foreign tax credits are unaffected and remain fully eligible for this tax credit, including the refundable portion. 

Given the drawbacks outlined above, it is clear that while the FEIE is intuitively attractive for its efficient and straightforward nature, careful analysis may reveal certain shortcomings that could very well prompt some expat taxpayers to reconsider its use in favor of the tax credit approach. Unfortunately, the IRS does not let taxpayers simply flip-flop between credits and the FEIE. Once the FEIE election is revoked, it cannot be claimed again for at least 5 years, and will require a specific written request and IRS approval to re establish.* For many taxpayers, that convoluted procedure alone may justify the added cost of using the FEIE, and in all cases it is clear that revoking the FEIE should only be done after very careful consideration and consultation with your accountant and advisor.

* https://hodgen.com/flip-flopping-the-foreign-earned-income-exclusion/


Headshot of financial advisor Syl Michelin in a blue suit with white button up shirt and gray background

Syl Michelin, CFA®


Syl Michelin is a Chartered Financial Analyst and fee-only, fiduciary financial advisor who works with cross-border families and American expatriates. 

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.


Navigating the Expatriation Process for U.S. Citizens 

Navigating the Expatriation Process for U.S. Citizens 

Why Expatriate?

Americans tend to be a relatively patriotic group, even when life’s journey takes them overseas to live. However, as many Americans become settled over time in a new country, it is only natural that they adapt to the culture, the language, the environment, etc. and adopt a new country as their “home.” Many of our expat clients acquire dual citizenship after spending significant time in a new residence country, or are able to acquire a second passport even faster due to the nationality of their parents or grandparents. 

Unfortunately, and quite unfairly, the retention of U.S. citizenship often then becomes a special burden to them, because of the unique laws of the United States that base income tax residency on citizenship, not on actual residency. Accordingly, the U.S. “dual national,” who may feel the ties to the U.S. ever fading, is also a “dual tax resident,” meaning that they are also subject to income taxation on worldwide income, from all sources, in both their new “home” country and the United States. Moreover, should they choose to gift wealth during their lifetime, or bequeath their wealth to others at death, the gift, estate and/or inheritance tax laws of both countries may stake a claim to tax these wealth transfers.

Complications for Long-Term U.S. Residents

There is another, larger group of U.S. taxpayers that may find themselves in this same situation: long-term U.S. residents. These are noncitizens that held a U.S. green card and lived in the United States for eight years in any fifteen-year period. Once you become a long-term resident, U.S. tax residency permanently follows you when you leave the United States, whether the long-term resident returns to their home country or elsewhere. They may let their green card expire, but the tax residency is not so easily shed.

Severing Ties with U.S. Tax Residency

There is a way out for both the U.S. citizen abroad and the U.S. long-term resident abroad that wants to sever ties with their burdensome U.S. tax residency: Formal expatriation, first through immigration filings renouncing long-term resident status (Form I-407) or citizenship (State Department Form 4079, Form 4080, Form 4081, and Form 4082), followed thereafter in a final U.S. tax resident form 1040 filing, accompanied with special expatriation tax filing form IRS Form 8854 (the Expatriation Statement). 

As a financial advisor who has had many client and prospective client discussions regarding the tax consequences, formal tax process, and tax-minimization strategies concerning expatriation, I will focus on the tax aspects of expatriation rather than get into the less familiar weeds of the surrendering of green cards or passports. I have only one point to emphasize on initiating the process through an expatriating act (Form I-407 or Forms 4079-4082): Do NOT go through with this until you have worked out the details of the tax filings and statements associated with expatriation, discussed below, and conclude that this is the right time to set this process into motion. 

Form 8854 and “Covered Expat” Status

Form 8854 is, essentially, a declaration of the expatriate’s complete balance sheet as of that day before they formally expatriated (the “valuation date”). It must include all the items that would be considered to be in their taxable estate if they were to have died on the day before she formally expatriated. Valuations of assets ranging the gamut, including real estate, art and jewelry, private business ownership interests, etc. must be attested to by licensed appraisers, while pensions, retirement accounts, brokerage accounts must be listed and provide their market values as of that same date. In addition to itemized valuations as of the valuation date, cost basis information must also be provided, for reasons that will be made clear below. Moreover, the expatriating individual must also make an attestation that they made full, complete and accurate tax filings to the U.S. Department of Revenue for the last five years.

The expatriation statement, tax returns over the preceding five years, and personal attestation of complete transparency and accuracy will help determine the most critical element of expatriation, namely, whether the expatriating individual will be deemed to be a covered expatriate. This status will largely determine the financial and consequences of expatriation, now and into the future. If covered expat status is avoided, the expatriating individual will pay their last U.S. federal tax bill as a tax resident (reporting worldwide income) for the year (or partial year) before expatriating and then, thereafter, would only be liable for U.S. taxes on U.S. source income, and subject to the U.S. tax withholding rules that apply to non-U.S. persons. 

However, should the circumstances trigger the key status as a covered expatriate, additional financial obligations ensue. First, the covered expatriate will owe an exit tax, above and beyond ordinary income tax obligations, in the year of expatriation. More details of the exit tax may be the subject of an article focussing on this particular subject, but, to summarize briefly:

  • The exit tax is calculated as if the expatriating individual sold all of their assets provided on Form 8854 the day before expatriating, meaning that all unrealized gains at that time are now, in-fact, realized. This is subject to a special exemption on the first $737,000 of realized gains (2020, adjusts annually); and
  • For retirement accounts, the exit tax is calculated as if the expatriating individual took full distribution of the pension, deferred compensation plan, retirement plan or IRA account. As this is ordinary income to the expatriate, the capital gains exemption above does not reduce taxes owed from these implied distributions. For qualified retirement plans like 401(k)s, but not IRAs, there is an ability to defer the tax from this implied distribution to when actual distributions are made, subject to special conditions, including application of the 30% withholding tax on each distribution and the waiver of the future right to reduce this withholding rate by tax treaty.

The burdens do not stop with the exit tax, either. Additionally, the covered expat will be deterred in the future from gifting or bequeathing assets to U.S. tax residents, such as family members that do not expatriate. Gifts and bequests from a covered expatriate are not entitled to a gift or estate tax exemption, and are taxed at the maximum tax rate by law on the entirety of the gift or bequest (currently 40%, or even 80% on generation-skipping gifts or bequests). This tax is actually paid by the beneficiary/recipient U.S. tax resident.

Covered Expat Status “Test”

By now, given the punitive taxation that accompanies the covered expat status, it is obviously critical to understand the test for acquiring this unfortunate status and the exceptions that otherwise prevent the triggering of covered expat status. Basically, the covered expat status is triggered by any one of three tests – fail any of the there following tests, and the expatriating individual shall be deemed a covered expat:

  • The Compliance Test – As mentioned above, the expatriating person must certify they have been compliant with federal tax laws over the past five years. Failure to certify and/or failure to submit adequate evidence to substantiate compliance will result in covered expat status. Expect extra scrutiny of these tax forms during the process.
  • High Income Tax Liability Test – Looking at those past five years of tax returns, the expatriating individual will be deemed a covered expatriate if their average federal income tax liability over the five-year period exceeds $172,000 (2021, adjusted annually). Do not confuse this with annual income or adjusted gross income – the standard is an actual tax liability on average per year exceeding $172,000, which implies high earnings and/or significant capital gains realization during part or all of those five years.
  • High Net Worth Test – Looking at the balance sheet of the individual taxpayer, as submitted in Form 8854, including substantiation of the valuation of assets and liabilities, if the expatriating person’s net worth on the valuation date exceeds $2 million, the expatriate shall be deemed a covered expat. Remember, joint assets should be apportioned between individuals, so this is an individual net worth threshold, not a joint threshold. Unlike the high income tax liability test, the $2 million threshold does not adjust to account for inflation.

It should come as little surprise that this third test, high net worth, is more often the test that triggers covered expat status, especially considering that net worth covers each and every item that would fall within the expatriating person’s taxable estate. However, getting around either of those tests’ thresholds may be a matter of timing, or, especially in case of the high net worth test, a matter of strategically repositioning family wealth among family members.

There are a couple of important exceptions for those that would otherwise fail the covered expat tests:

  • Dual nationals from birth (oftentimes considered “accidental Americans”), who have lived in the U.S. less than 10 of the previous 15 years prior to the year of expatriation, who continue to be citizens and tax residents of that other country for which they hold citizenship; and
  • Citizens who expatriate before the age of 18 ½ , who were resident of the United States for less than 10 years.

Remember that all expatriating persons must still file Form 8854 and go through the tax process of expatriation, even though these two groups may do so without fear of being deemed a covered expatriation.

Conclusion: A Complex Process Demands Upfront Professional Planning

To generally recap the tax rules regarding expatriation – the procedure for eliminating tax residency on the basis of citizenship or long-term residency status – the expatriating person must commit an expatriating act and complete the tax filing and certification process outlined above. For the citizen, this will involve forms and procedures to formally terminate citizenship, e.g., surrendering of the U.S. passport. For a long-term tax resident, this might involve voluntarily surrendering your green card. Letting a green card expire without renewal, by itself, may not be an expatriating act. Therefore, the completion of Form I-401, entitled “Record of Abandonment of Lawful Permanent Resident Status,” is critical to establish intent to expatriate for long-term residents. This will then trigger the obligation to complete Form 8854 and certify compliance with U.S. federal tax laws. 

During this tax process to conclude expatriation, a critical factor determining the real cost to get out of U.S. tax residency will be whether covered expat status is triggered. Because the consequences of that status can be so punitive in the present (exit tax) and thereafter to the American beneficiaries or heirs, it seems only logical to suggest that the expatriating person get some meaningful tax and financial advice well in advance of committing the expatriating act. In particular, if there is any real possibility that the three tests for covered expatriation could be met, and the two exceptions for covered expats will not apply, then developing and implementing a comprehensive strategy for expatriation with experienced financial and tax professionals may prove pivotal to navigating this process without creating unnecessary tax burdens for the expatriating person and their American families. 

How We Can Help

At Walkner Condon, our international team of financial advisors is here to help guide clients that want to consider the possibility of expatriation. The first step of the process may be to determine what real tax advantage would flow from successfully expatriating. This requires an analysis of both U.S. and resident country tax laws and whatever tax treaties or compacts may factor in the distribution of tax payments by the client to each country. 

If there may be financial relief to be gained through expatriation, then an evaluation of whether the client would meet the covered expat criteria, or, importantly, whether there are steps necessary prior to expatriation to either (a) avoid covered expatriate status, (b) at least reduce the exit tax consequences, or (c) modify estate plans to reduce the gift and/or estate tax consequences flowing from the decision to expatriate. 

Ultimately, if a general strategy map toward expatriation is formulated, we’ll make sure that clients also get the tax and legal expertise needed to successfully implement that strategy and successfully navigate the complex rules of formal expatriation. It begins with a conversation, and we’re here to provide knowledge, support and advice that is helpful and impactful. 

Stan Farmer




Over the past few years, our Expat Group at Walkner Condon has covered the success of Portugal’s Non-Habitual Residence (NHR) program extensively. As a former expat who lived in Portugal before returning to the states in 2011, finding other Americans living in Portugal (well, Lisbon at least, as I can’t say I was laying back and enjoying the calmer life of the Algarve, which at that time was known mainly as a British expat enclave) was difficult. However, over the past handful of years, the transformation of Portugal into a key in-demand destination for Americans (retirees but also non retirees) has been absolutely stunning. According to Forbes, the number of Americans living in Portugal rose 45% in 2021 from the prior year. And 2022 got off to an even hotter start, with VISA-motivated investment by Americans more than tripled in the first quarter of 2022 over the first quarter of 2021, according to SEF, the Portuguese Immigration and Border Service. The American Expat trends in Portugal certainly show no sign of slowing. Rising housing prices in the U.S., a favorable Euro/USD exchange rate and the popularity of remote work have no doubt added kerosene to the NHR fire!

Portugal’s NHR success story has not gone unnoticed by other fiscally-challenged EU member nations that would like to attract more talented and/or wealthy expats to immigrate and contribute to their economies and tax rolls. It should come as very little surprise that Italy and Greece have prepared to enter the competition for these expats, whether they be citizens that fled in years past for better opportunities elsewhere, or foreigners looking for attractive low-cost living options in Southern Europe with enticing scenery, warm climates, rich in cultural tradition and, of course, tax breaks. 

Perhaps as the influx of expats in Portugal continues to crowd its beaches and inflate the once-attractive housing market, it’s time to consider these relatively new tax programs in Italy and Greece and compare them with each other and with Portugal’s NHR program. Obviously, the competition for the would-be expat’s visa application comes down to more than tax arithmetic, but understanding a few key features of the Italian and Greek tax programs for expats should prove to be a valuable launching point into further inspection and study of these countries as potentially viable competitors of Portugal for expats moving forward. Accordingly, we’ll briefly outline some key tax features introduced in Italy, and then we’ll take a similar look at what Greece is doing to entice attractive expats.


While Portugal’s NHR program offers, for the most part, the same thing for everyone (the exception applying to Portuguese-based earnings, where incentives are afforded only to workers in only certain professions), Italy takes a completely different approach: three distinct tax incentive regimes. Any would-be expat shopping for a program will therefore study each of these three regimes and determine whether one of them would fit the bill. The highlights (NOTE: only a cursory overview) of each of these three regimes are set out individually below. Like most things I’ve learned about the Italian tax system in general, they’ve designed this with complexity and special rules and exceptions abound.

The Impatriati Regime – Calling all Digital Nomads/Remote Workers, Self-Employed Businesspersons, Freelancers or Others Landing Employment in Italy

The Impatriati Regime looks to attract people moving their tax residency to Italy that are willing to commit to Italian tax residency for two years. Eligibility requires that you have not been a tax resident of the country for the two prior years. The regime is designed for workers – those who are going to earn taxable income – because the Impatriati regime tax incentives apply to employment (or self-employment income).

The main tax incentive is that participants are taxed on only thirty percent (30%) of their employment or self-employment income. If the participant moves to one of the southern regions of Italy, the employment/self-employment incentive improves for the participant, as they will be taxed on only ten percent (10%) of their self-employment income. Note that these incentives do not reduce the applicable required Italian social security contributions, nor do they apply to capital gains taxes. The incentives are designed to reduce active income from employment, not passive income nor pension income. It is important to note that there is NO CAP on the amount of income that can be reduced per this regime.

The Impatriati tax incentives last for five years. However, the regime can be extended for another five years under certain conditions: (a) the individual has at least one minor child, or (b) the individual, their partner, or their child purchase a home in Italy the year preceding the beginning of their participation or thereafter. However, the amount of income-tax-exempted income is reduced from 70% (or 90% if applicable) to 50% during this extended period, unless the participant has three or more minor children (which I guess that’s one way to combat the aging population crisis!).

The Fixed Tax Regime – Attention Ultra-High Net Worth Individuals

Completely different from the Impatriati regime’s incentives that focus on employment/self-employment income, this regime (we’ll call it “Fixed” or “UHNW”) focuses on income generated from offshore sources and caters to a very select group of potential immigrants.  This program applies to foreign sourced income generated abroad that would otherwise subject Italian tax residents to income taxes or capital gains taxes. It also applies to inheritance or gift taxes that would otherwise apply to gifts given or received or inheritances received from abroad.

The incentive is considerably more straightforward than those in the Impatriati regime: the participant pays a fixed €100,000 annually and no further taxes are due on the above-referenced income, capital gains, gift or inheritance items. Additional family members can be included in this regime for an additional €25,000 annually. 

Membership in this regime has further privileges. First, it lasts for fifteen (15) years. Second, it exempts participants from paying wealth taxes on their offshore assets. Finally, it even excludes participants from having to make a declaration to the Italian tax authorities on their offshore assets.

While this regime does not reduce Italian taxation on Italian-sourced income (normal rates apply), the Fixed/UHNW regime might be particularly attractive to affluent expats with substantial investment portfolios and/or foreign-source income.

The Flat Tax Regime For Foreign Pensioners

To qualify for the Flat Tax regime, you have to be retired, or at least receiving a pension income. The pension can be public (e.g., Social Security) or private (e.g. 401k or IRA). Participants must not have been an Italian tax resident in any of the previous five tax years. Significantly there is also an important geographic/demographic restriction to participate in this regime:  the participant must establish residency in a municipality with less than 20,000 inhabitants in the Southern regions of Italy. Therefore, extensive exploratory visits to remote locations in Southern Italy are highly recommended before planning to participate in this regime.

For those retirees, or semi-retirees, comfortable with those limitations, very attractive tax incentives await. First, participants will enjoy a flat tax of seven percent (7%) on their foreign-source income, including pension income and also capital gains on otherwise taxable foreign investments/property. Second, participants are exempt from any applicable wealth tax. Finally, participants also are not required to declare their offshore (foreign) assets. Ordinary Italian income and capital gains rates will apply to Italy-source income.

This regime’s incentives last for ten (10) tax years, so this fits right between the time limitations of the best incentives in the Impatriati regime and the Fixed/UHNW regime. For retirees looking for some of the lowest cost destinations Italy has to offer in order to kick back and enjoy a peaceful retirement environment with a warm climate for a decade, the Fixed Regime may indeed prove to be an ideal tax incentive regime. Thereafter, taxes revert to regular Italian rates on all (worldwide) income (or wealth) from all sources.


Much like Italy, Greece’s economy has suffered tremendously for quite some time, and particularly so with the onset of the pandemic. Another key similarity to Italy and Portugal:  the existing tax regime for residents was highly unlikely to make it a choice destination for retirees and/or high net worth expats (45% marginal tax rate on income over €35,000). With that in mind, Greece has also joined the tax reform race to attract a much-needed injection of wealthier foreigners and expatriate nationals. The approach by Greece is almost a carbon-copy of the Italian reforms discussed above, but differences will be noted below.

Tax Relief for Expats on Earned Income from Greek Employment and Self-Employment

Originally, this tax incentive program was created in 2020 to benefit persons gaining tax residency in Greece in order to work for Greek companies or foreign companies with a permanent establishment in Greece.  In 2021, special provisions were added to provide these tax incentives to self-employed expats to attract the growing masses of “digital nomads” who could work remotely from almost any country to provide their services to clients. The Visa process for digital nomads would naturally be different and Greece may still be working out the wrinkles, so you may need some expert assistance from an immigration expert in Greece (whatever one would call the equivalent of an Italian “commercialista”).

The key tax benefit of these programs is a huge tax break on earned income:  Under the programs, Greece will levy taxes on only 50% of annual earned income for the seven (7) year duration of the program. There are several conditions to these incentives:

  • Applicants were not a tax resident of Greece for at least five of the previous six years before transferring tax residency to Greece;

  • Tax residence is transferred from an EU member state or EEA (EU plus Iceland, Liechtenstein and Norway) or from a country with which Greece has an administrative cooperation agreement on taxes with Greece (this includes the USA as these countries have a valid income tax treaty in place for over 50 years);

  • The applicant provides services in Greece in the context of an employment relationship with a Greek legal entity, a permanent establishment of a foreign entity in Greece, or (post 2021) through self-employment business activity; and

  • The applicant must commit to remain a tax resident of Greece for a minimum of two years.

As you can see, the Greek tax regime for expat employees/self-employed is very similar to the Italian Imperiati regime. The Imperiati regime appears more generous in terms of tax reduction for the first five years and can be extended for an additional five years on level terms for the Greek program, but only if additional requirements are met. On the other hand, the Greek tax incentives last seven years with no possibility of extension. Interestingly, Portugal’s NHR program lasts ten years and provides a flat tax of 20% on Portugal-source earned income, but only for certain professions, which can change over time, which makes it less comprehensive when it comes to domestic source earned income.


Ultra-High Net Worth Fixed Tax Regime a/k/a “Non-dom Investor” Status

Just like Italy, Greece has added a Fixed or UHNW tax option, whereby participants moving to Greece may pay exactly €100,000 annually for a maximum of fifteen (15) years, and can add any relative into the deal for another €20,000 per person per year.  This will relieve the participants of any further income tax obligations from non-Greece sources. Furthermore, participants are not subject to Greek inheritance, gift and parental grant taxes as well. And, unsurprisingly, the non-dom status also relieves participants from having to declare their income earned abroad. 

To qualify for non-dom status in Greece, two important conditions must be met:

  • Prior Non-Residents Only:  Applicants must not have been tax residents of Greece for seven of the prior eight years to qualify; and
  • Investment in Greece:  Applicants must show that they, or their relatives, directly or indirectly (through an entity of which they are a majority owner) invest at least €500,000 in real estate, businesses or transferable securities/shares of entities based in Greece.

Accordingly, while the term and the tax bill is identical to the Italian Fixed/UHNW regime, the key difference is that Greece is requiring a substantial investment in Greece to apply. Of course, anyone with overseas income at a level that makes paying Greece €100,000 each year for taxes on that income a “deal” will likely have no issues buying a residence there for over the €500,000 investment threshold.


The Flat Tax Regime For Foreign Pensioners a/k/a “Non-dom Pensioner” Status

Greece also has a non-dom regime for  foreign pensioners, which, like the Italian flat tax regime for pensioners, enables participants to pay a flat rate of seven percent (7%) on all of their foreign-source income to Greece.  To qualify, there are two key conditions for this program:

  • The applicant cannot have been a tax resident of Greece for five of the prior six tax years before transferring their tax residence to Greece; and
  • The transfer of residency must come from a state with which Greece has an agreement on administrative cooperation regarding taxation (includes the U.S.) in force.

As in Portugal’s NHR program, participants in the non-dom regime for pensioners in Greece must declare all of their worldwide income annually, whereas the Italian pensioner regime does not require the declaration of offshore income. 

There is certainly one feature of the Greek program that is superior to both Portugal’s NHR program and the Italian fixed rate tax regime: its longevity. Retirees wishing to not revert to the high tax rates of Western Europe after ten years will no doubt appreciate the fifteen year duration of this tax incentive program. Another critical advantage over the corresponding Italian tax incentive regime is that Greece’s program does not impose geographic/demographic restrictions. If you are a retiree who prefers an urban community, the Greek program may be a better option for you.


This brief explanation of key features, conditions and restrictions of the newer expat tax incentive programs introduced in the last few years in Italy and Greece are both a testament to the success of Portugal’s NHR program for attracting foreign wealth and investment and a strong entry from these fellow EU nations in the competition to attract vital expat residents. The relatively low cost of living, favorable climates, and historical cultural attractiveness are advantages that all have traditionally shared, but their traditional tax regimes did little to enhance the attraction of residency in any of these Western European gems.  With the population explosion of expats in Portugal, property values and, therefore, the expat’s cost of living are on the rise. It may be time for would-be expats, digital nomads and retirees, to focus on these newer programs and broaden their horizons to consider all that Italy and Greece have to offer with a more level fiscal playing field. After all, these expat tax incentive programs appear to share more similarities than differences.

Remember that this is not intended to be an all encompassing comparison of the pros and cons of immigrating to any of the above-mentioned countries that are offering special tax concessions through their programs. Consider this a launching point for further inquiry and research. For example, consider other potential taxes that might affect your decision and which may depend on your unique objectives and financial/familial situation. Inheritance taxes, property taxes, etc. may dramatically alter the financial attractiveness of these destinations depending on your circumstances. Additionally, immigration eligibility and steps to obtaining the ability to become resident, and the costs involved in the immigration process for any of the above-mentioned countries are very important considerations, but are well outside the scope of this article. 

If you are contemplating a move from the United States to live an expat adventure, in Portugal, Italy, Greece, or elsewhere, your financial planning and investment management needs are about to change dramatically, but we’re here to help expats manage through the inevitable complexities. Consider reaching out to me or one of my colleagues, Sylvain Michelin and Keith Poniewaz. You can find a way to schedule a no-obligation consultation with us, and much more useful information regarding expat financial and investment topics, on our website.


Headshot of financial advisor Syl Michelin in a blue suit with white button up shirt and gray background

Stan Farmer, CFP®, J.D.


Stan Farmer, J.D., is a Certified Financial Planner™ (CFP®) and fee-only financial advisor who specializes in working with U.S. expats and Americans living outside the U.S.

WEBINAR: Moving to Portugal as an American

WEBINAR: Moving to Portugal as an American

Let’s dive into financial life in Portugal as an American.

When people reach out to our team of US expat financial advisors, there’s a good chance they’re either living or planning a move to a certain place – Portugal. And it’s not just something we’ve seen. It’s something the Wall Street Journal & LA Times have written about, too.

So as Portugal continues to grow in its popularity for Americans moving abroad, we’re focusing in on the key components of such a move from a finance & investing lens. After all, those areas will impact your experience in Portugal, whether it’s two years or for the duration of your retirement.

Our team of advisors – Stan Farmer, CFP®, J.D; Syl Michelin, CFA; and Keith Poniewaz, Ph.D. – present and then answer questions in the second portion of the webinar. Questions before or after watching the webinar? Send us an email at [email protected].

You can watch the full replay below or on Walkner Condon Financial Advisors’ YouTube channel.

If you have any questions, we’d encourage you to submit them ahead of time using the button below.

3 Reasons to Look at Investing Internationally in 2022

3 Reasons to Look at Investing Internationally in 2022

In 2021, the U.S. stock markets hit record highs almost 70 times, and the consensus is that the U.S. market is largely “expensive.” Such a snap view is confirmed by a variety of valuation metrics: price-to-earnings ratios (P/E) and forward P/E being chief among them. Moreover, the bond market is poised to face a rough 2022 because there is a growing consensus that the United States Federal Reserve Board (also known as the “Fed”) will also increase interest rates, which historically has caused bond prices to fall. Between this seeming domestic “rock and a hard place,” there are some areas that continue to look like good deals: one of which is international equities.

In this article, I will cite three key reasons why investing now in international markets might be a good long-term investment: or, in other words, explain why the U.S. is expensive and the rest of the world is not.

Currency and the Almighty Dollar

The U.S. dollar is relatively strong right now – and indeed might get stronger in the near future because the U.S. may raise interest rates as soon as March. Indeed, the dollar posted its best year since 2015 in 2021, and the U.S. dollar index (DXY) was up 6.5% in 2021

However, overall a stronger U.S. dollar will make international goods and services more competitive (or allow manufacturers to make more money) in the longer run. How does that work? In short, a stronger U.S. dollar means it is less expensive to buy foreign goods and services. If the dollar is weak versus the euro (let’s say $1 equals 0.8€), for example, a purchase of an automobile that costs 30,000€ would equal $36,000, and the automobile will be compared to those similarly costing $36,000. If, however, the dollar is strong (let’s say $1 equals 0.9€) a 30,000€ automobile would only cost $33,000. A manufacturer can deal with this in a variety of ways– it can aim to sell more cars at less price (instead of 10,000 cars at $36,000 try to sell 15,000 at $33,000) or the same number of cars at the original $36,000 price, booking the currency gain of $3,000. In either case, the firm will be helped by the stronger U.S. dollar.

The U.S. dollar being strong also has the effect of meaning that just as the foreign currency could theoretically buy more car for less– a stock originally priced in euro can also be bought for less. Indeed, foreign market returns for U.S. investors were hindered by approximately 5.2% by currency headwinds last year due to the strengthening U.S. dollar according to JP Morgan.

An additional tailwind of a strong dollar for international markets is that it frequently promotes international travel, improving many economies that depend on tourism for a large chunk of their GDP. However, the ongoing pandemic may lead to this effect being muted. Should COVID progress to an “endemic” rather than a pandemic, we’ll likely see an increase in travel to foreign countries buoyed by pent-up demand for travel and the ability to buy more with less.

(For those who prefer a video explainer from the perspective of U.S. companies, look here for an overview from the WSJ)

Rest of the world GDP growth 

One of the ongoing beliefs is that the U.S. economy (and accordingly its stock market) is doing better because the U.S. economy is doing better than the rest of the world. This is not necessarily the case.

In fact, between 2012 and 2019 the GDP growth rate of the rest of the world surpassed that of the United States by 0.5% per year – though this was admittedly a cooling down as the rest of the world grew at a rate exceeding the U.S. by 1.2% from 2001-2011 according to the JP Morgan Guide to the Markets. In fact, the last time the U.S. outpaced the rest of the world in GDP growth was from 1992 until 2000. Despite this growth advantage, U.S. large-cap stocks have outpaced the rest of the world (the MSCI EAFE index) by roughly 275% over the last 14 years. (JPM)


This might be the most compelling case for looking at non-U.S. equities going forward – an international note we’ve hit on in our Gimme Some Truth podcast before in this episode. As I noted in the introduction, the U.S. (particularly U.S. large-cap stocks) is trading very high relative to its longer-term P/E measures. There are several reasons for this, but a key one is the low-interest rates in the United States and a very strong run for U.S. technology over the last 10 years. On the other hand, despite negative interest rates, valuations of non-U.S. stocks have not soared. 

Indeed, relatively speaking, valuations for non-U.S. stocks are deeply discounted compared to the U.S. Again, according to the JP Morgan Guide to the Markets, the rest of the world’s forward price-to-earnings ratio (FPE) was at 14.1 versus the S&P 500’s 21.2 FPE. This is compared to a 20-year average of 13.3 FPE versus 15.5 FPE for the U.S. In other words, the rest of the world is trading at a 32.7% discount versus U.S. FPE, which is significantly off of its 20-year discount of 13.2% discount. Moreover, the rest of the world is yielding higher than the U.S. right now. On average, the U.S. has dividend yields about 1.6% less than the rest of the world (compared with a 1.1% average difference over the past 20 years).

Such data also apply as we look from region to region. For instance, Japan, despite macroeconomic forecasts of 3.2% growth next year, is currently trading below its 25-year forward P/E ratio. 

In short, even if we take into account that the rest of the world tends to trade at lower valuations historically, the rest of the world is trading at a discount in terms of price to earnings. 

There is an old saying in investing that the market can stay wrong longer than you can stay solvent. While we don’t go that far in our risk-taking, the 14-year ongoing out-performance of U.S. large caps has exceeded the longest previous period of out-performance by approximately 6.5 years and growing (the rest of the world outperformed the U.S. for 7.3 years from approximately 2001-2008; the longest period of U.S. out-performance was a little over six years during the 1990’s dot com boom). It is impossible to predict when the shift will occur, but from a long-term perspective, the rest of the world is looking like a better and better deal.

Keith Poniewaz, Ph.D.