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Congress designed the PFIC rules to discourage Americans from deferring U.S. tax through offshore funds. The result is a punitive system: instead of tax deferral, investors are either taxed annually on income they may not have received (through a Qualified Electing Fund, or QEF, election), or under a default regime that re-characterizes gains, spreads them over the holding period, and layers on an interest charge.

Many American investors assume that if a foreign fund, bank, or lawyer works with U.S. clients, they will proactively flag any U.S. tax concerns. That assumption is understandable, but it isn’t safe. Americans are subject to uniquely complex tax rules that follow them across borders, rules that do not apply to investors from most other countries. Whether or not a fund is respected, well-regulated, or fully compliant under Portuguese law says nothing about how it will be taxed by the United States.

Some U.S. investors exploring the Portuguese Golden Visa program consider using assets held in Self-Directed IRAs or Solo 401(k) plans to fund their investment. However, this approach carries significant legal and tax risk under U.S. law and may result in substantial penalties.