Nobody at the Bank Will Tell You This Account Is Radioactive

A working guide to the PFIC regime, the mistake that springs it, and where the clean answer quietly breaks.

There is a fixed point in this analysis that does not move, so I shall state it first. If you are a US citizen or permanent resident, you carry the US tax system with you across every border for as long as you hold the status. Residency-based taxation is the rest of the world; citizenship-based taxation is the United States and, functionally, Eritrea. You cannot change your tax jurisdiction by moving to another country (it compounds, actually). Everything that follows is a consequence of that single, unmoving fact, and most of the expensive mistakes in cross-border investing come from acting as though moving abroad changed it.

What moving abroad changes is the menu of instruments put in front of you, and that is where the damage starts. The local bank, the relationship manager, the perfectly reasonable-seeming brochure all point toward the same thing: a locally domiciled fund, a unit trust, an insurance-wrapped savings product.

To a non-American these are ordinary.

To a US person they are radioactive, and the reason is a corner of the tax code called the passive foreign investment company (PFIC) regime. This guide is about what that regime actually does, why the intuitive de-risking move triggers it, and what the structurally clean alternative is, along with the part nobody tells you, which is where that clean alternative stops working and why this is a sequencing problem before it is an investment problem.