International

Investing from the Netherlands as a US Citizen: the PFIC Problem

Updated: 6 October 2026 Holdwise editorial team

As a US citizen in the Netherlands, you pay very high US tax on most non-US investment funds under the PFIC rules. This includes the EU-based ETFs that every Dutch broker offers. The United States taxes its citizens on their worldwide income. Many Americans find this out after their first fund purchase. Holding the investments in a company is often suggested, but other US tax rules then apply. At Holdwise, we keep this answer up to date and change it when the rules change.

What PFIC means

A Passive Foreign Investment Company (PFIC) is, broadly, any non-US pooled investment. Examples are EU-domiciled ETFs, Dutch investment funds (beleggingsfondsen) and most UCITS products. On a US tax return, a punitive default regime applies to PFIC gains. They are taxed at the highest ordinary rate, with an interest charge for the deferral. You must also file Form 8621 for every position. For small positions, the cost of this paperwork alone is too high. The rules were made to stop tax deferral through offshore funds, and they also apply to ordinary expats.

Four options for US citizens

Direct stocks and bonds. The PFIC rules apply to funds. Individual shares are ordinary stocks. A diversified portfolio of direct holdings is usually the best solution, but you must spread the risk yourself.

US-domiciled ETFs, if you can access them. US funds are free of the PFIC problem. Under EU consumer-protection rules (PRIIPs), most European brokers sell them only to professional clients. There are a few options. You can use a US broker that accepts US persons abroad, or you can ask for professional-client status. Discuss these options with your broker before you choose.

Accepting PFIC on purpose, with a QEF election where available. A few funds publish the required US information statements. For those funds, you can choose Qualified Electing Fund (QEF) treatment, and the US tax treatment is much milder. You can use this for specific positions, with your US tax preparer involved from the start.

Pensions with treaty protection. Under the tax treaty between the US and the Netherlands, certain Dutch pension arrangements are recognized. Those arrangements are outside the day-to-day PFIC problems. For US persons here, pension saving is therefore especially valuable.

Does a Dutch private limited company (besloten vennootschap, BV) help?

The internet loves the idea of a BV as a PFIC shield: put the ETFs in the company, problem solved. The US rules anticipated that relocation. A BV majority-owned by a US person is a Controlled Foreign Corporation, and the GILTI and Subpart F regimes reach its passive income on your US return. That is a different three-letter problem in place of the first one. The BV makes sense on the Dutch side: for operating profits and for the holding structure. It also makes sense for the box 3 planning that Dutch residents face. This includes the 2028 change to actual returns. For a US citizen, every entity decision needs both flags on the table at once. We set up the Dutch side and coordinate directly with your US tax advisor, so the structure works on both returns.

Primary sources: IRS Form 8621 · Belastingdienst.

Compare the Netherlands with Ireland and Germany on tax, substance, running costs and time. See setting up a Dutch subsidiary for a foreign parent company.

Frequently asked questions

Are EU ETFs really a problem for US citizens? +

Yes, under the PFIC rules. The US taxes EU-domiciled ETFs and funds in a punitive way, and you file Form 8621 for each position. The options that work are direct stocks, US-domiciled funds where you can buy them, QEF elections and treaty-protected pensions.

Does a Dutch BV solve PFIC? +

If you hold funds inside a BV, you have the CFC problem (Subpart F and NCTI, formerly GILTI) on your US return in place of the PFIC problem. A BV is useful for operating profits, the holding structure and Dutch box 3 planning. Work this out together with your US tax advisor.

What should I do before my first investment here? +

First decide how you set up your accounts. Check what your broker will sell you as a US person. Choose between direct holdings and US-domiciled funds. Align the Dutch side with your US filing position. If you plan this now, you can avoid years of Form 8621 filings.

Sources Belastingdienst · KVK · wetten.overheid.nl Last updated: 6 October 2026