401(k) Individual Retirement Account (IRA), is an increasingly popular strategy among American investors to fund €500,000 euro investing in a Portuguese private equity or venture capital fund to receive Portuguese golden visa. This can be done by converting to Self-Directed 401k (SDIRA) or Solo 401k which allows you to direct your retirement funds into a foreign country fund. An US LLC can be used as middleman to own the self-directed IRA. LLCs must remain ‘in business’ to receive any interest and/or buy back.
Transfer Funds from SIDRA to Portugal
This can be done with the help of LLC. Follow the steps below..
- Roll over your IRA to SIDRA (Self directed IRA)
- SIDRA owns US LLC (eg. Delaware company) as sole owner
- Assign beneficiary as manager of LLC to make investment decisions.
- LLC will make investments abroad.
Opening a bank account in Portugal banks is mandatory under golden visa rules. Be sure the Portuguese bank you open an account is FATCA compliant and that they can provide custodian services to US investors.
Consequences
American investors need to be aware of several rules which do have consequences..We have provided some tips for US investors with taxation and reporting.
- A self-directed 401(k) provides several investment opportunities, including private loans and limited liability companies (eg. Delaware). However you need to be careful with the prohibited transactions set by IRS such as investing in life insurance, metals etc.
- Moving your 401(k) to an international fund will result in U.S. tax liability and possibly the 10% penalty for an early withdrawal.
- Withdrawing money from a traditional 401(k) before you turn 59 ½ years, can result in income taxes. Roth IRAs and Roth 401(K) withdrawals are taxed on distributions.
Double Taxation
US and Portugal has signed a tax treaty. You are not required to pay U.S. income taxes on your Portuguese-source income. This is because the United States and Portugal have a bilateral tax treaty.
Disclaimer: Please seek professional tax advice from a qualified CPA and lawyer before you commit your investment. The above information is provided in general advice, may change from time to time.
