Home » New European PRIIPs Regulations Make Investing Even More Difficult For US Expats

New European PRIIPs Regulations Make Investing Even More Difficult For US Expats

by Tom Zachystal, President of Individual Asset Management

Since January 1st 2018, any person or firm advising an EU resident, including US expats living in Europe, regarding certain types of investments has to comply with new EU-wide regulations known as the PRIIPs. This regulation effectively makes it very difficult for US tax-payers living in Europe to invest in any “packaged products” such as mutual funds or exchange-traded funds.

What is a PRIIP?

“PRIIP” stands for “Packaged Retail Investment or Insurance-Based Product”. These include all funds, many insurance and pension products, as well as any other retail investment products where the value of the investment is subject to the performance of shares, bonds, indices, or other securities.

Tom Zachystal

The PRIIPs Regulation states that anyone who creates a PRIIP within the EU must create a KID, and that no one who advises or sells PRIIPs to anyone living in the EU may sell or advise the purchase of a PRIIP that doesn’t have a KID.


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What is a KID?

A KID is a Key Information Document, which must provide certain details about the investment. The PRIIPs regulation in fact contains very detailed and specific instructions regarding what a KID must contain. For example, KIDs must contain a description of the investment, a description of the target investor, the purpose of the investment, details about the costs of the investment to the investor (the fees), and a lot of detail regarding potential risk.

Details about how risky an investment might be to an investor must include a summary risk indicator (e.g. low, medium, or high), how this was calculated, a breakdown of costs relating to the investment such as fees, three performance scenarios showing the possible consequences for the investor in each case, and investor complaint procedures.

How does the PRIIPs regulation affect US expat investors living in the EU?

The PRIIPs regulation has had significant unintended consequences for American expat investors who reside in the EU. In particular, many US investment products are now not legally available to residents of EU countries; because as they don’t have an EU-approved KID, they cannot legally be sold to EU residents. Many US funds can’t comply with EU PRIIPs legislation because parts of the new rules are contradictory to some US financial regulations.

A number of US brokerage firms do not, as yet, seem aware of PRIIPs regulations. However, as awareness spreads it will become increasingly difficult for EU based investors to buy US ETFs or other US funds.

The alternative for US expats in the EU of investing in European funds instead often has complex and potentially expensive US tax ramifications. Many non-US funds are treated as “Passive Foreign Investment Companies”, or PFICs, for US tax purposes, which can have unpleasant reporting consequences.

What solutions are available for US expat investors living in the EU?

So the recent EU PRIIPs legislation has left many US expat investors living in Europe caught between a rock and a hard place: They may have limited access to US funds, but investing in European funds triggers onerous US reporting requirements that require expensive compliance assistance to avoid fines.

There are investment options available for US expat investors living in the EU though. For example, some US products cater to EU investors and so abide by EU rules, or an investment portfolio can be constructed from products that do not fall under PRIPPs regulations such as one composed of individual shares or CFDs (Contracts For Difference).

At IAM we specialize in investment management and financial planning for US expats and we offer investment portfolios for EU clients that conform to PRIPPs regulations.

Tom Zachystal, CFA, CFP is President of Individual Asset Management, a Registered Investment Advisor specializing in investment management and financial planning for expatriates. IAM offers investment portfolios for EU clients that conform to PRIPPs regulations.

Contact Tom for a free, no-obligation discussion of your financial situation if you are a US citizen living abroad or a foreign national living in the USA.


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