Where Owning a US Annuity Is Tax-Smart Abroad: A Country Ranking for US Citizens
Written by Hans Goldstein, EA, licensed insurance agent · CA 4273294Admitted to practice before the IRS
Short answer: for a US citizen holding a non-qualified US life annuity, the lightest tax outcomes are Costa Rica and Panama (territorial, no US treaty), Spain, Switzerland and Italy, where only a small share of each check is taxed. Norway is the opposite: no wealth tax on the contract but a 22% tax on the gross check. In most treaty countries the treaty lets the US credit the foreign tax, so you pay about the higher of the two countries’ taxes, not both. Several countries below are not fully verified and are marked. Not tax advice.
The ranking in one table
| Country | Wealth tax on the annuity | Income tax on the check | Total for a US citizen | Confidence |
|---|---|---|---|---|
| Costa Rica, Panama | None | Territorial: foreign income not taxed; no US income tax treaty | US tax only | Secondary sources; a Costa Rica bill would add 15% |
| Spain | Counted (Madrid and Andalusia relieve it) | 8% to 24% of each check taxable by age at start, then 19% to 30%: about 5% to 7% of the check at 60 to 69, about 2% at 70+ | About the higher of Spain and the US | Statute verified |
| Italy | Possibly 0.2% on foreign financial products | Yield only, or 7% flat for 9 years for pensioners in small southern towns | About the higher of the two | Mostly secondary; statute not checked |
| Switzerland | Zurich: not taxed once paying with no surrender value | About 7% of the check | US tax dominates | Verified for Zurich |
| Germany | None | Fixed share by age at start: 21% at 62, 18% at 65, 15% at 69 to 70 | About the higher of the two | Statute verified |
| UK, Ireland | None | Only the interest element; capital element exempt | About the higher of the two | UK statute verified, share not; Ireland secondary |
| Greece, Cyprus | None | Special flat regimes (7%, 5%), unclear for a purchased annuity | Real double tax possible: the treaty has no US-citizen relief | Unverified |
| Portugal, Mexico | None | Progressive; treatment of a purchased annuity unclear | About the higher, if the relief rule works | Unverified |
| France, Netherlands, Colombia | Netherlands Box 3 counts it; Colombia 0.5% to 1.5% above about $0.9M; France real estate only | France 30% of the check at 70+ plus social levies; Netherlands and Colombia heavy | France may double-tax | Mixed |
| Norway | Outside if the insurer was never licensed in Norway | Gross check taxed at 22% | Partial double tax: the US taxes only the gain share | Wealth rule verified |
Does it cancel out?
A US citizen pays US tax wherever they live. The question is whether the foreign tax is credited. An annuity from a US insurer is US-source, and the foreign tax credit normally covers only foreign-source income. Most modern US treaties fix this with a rule for US citizens: the residence country credits only the US tax a non-resident would owe, and the US treats the income as foreign-source to the extent needed to avoid double tax. I confirmed that rule in the treaty text for Germany, Ireland, Italy, Portugal, Mexico, Malta, Spain, the UK and the Netherlands. I did not find it for Norway, Cyprus or Greece, so double tax is a real risk there. The result where it works: you pay about the higher of the two countries’ taxes, not the sum.
The bases also differ. The US taxes only the gain share of each check (the exclusion ratio, IRC 72(b)). Norway taxes the gross check, so the US credit offsets only part. Switzerland and Spain tax a small share, so the US tax is the larger and the local tax adds little.
Who taxes first?
Every treaty I read says annuities are taxable only in the country where you live. The saving clause lets the US tax its citizens anyway. So the residence country taxes first, and the US relies on the credit above. Treaty articles for the annuity clause: Germany 18(2), UK 17(4), Portugal 20(2), Italy 18(2), Ireland 18(2), Mexico 19(2), Spain 20(2), Malta 17(3), Cyprus 23(2), Netherlands 19(1), Norway 18(2), Greece XI(2). Costa Rica, Panama and Uruguay have no US income tax treaty.
The dollar risk
The annuity pays dollars. Your costs may be in kroner, euros, francs, pounds or pesos. Over the 20 years to October 2026 (Federal Reserve H.10 rates), local currency per US dollar ranged: NOK 4.95 to 11.68 (now 9.57); EUR 0.62 to 1.04 (now 0.89); CHF 0.73 to 1.27 (now 0.83); GBP 0.47 to 0.93 (now 0.76); MXN 9.92 to 25.13 (now 18.40). I do not predict where they go. A natural hedge: a home and other assets in the local currency offset the dollar income. A sensible mix is a local home plus a dollar annuity as the income floor.
What this means
- Wealth tax is only half the picture. Norway’s outside-the-base rule is real, but the 22% on the gross check can cost more. See the Norway how-to.
- Spain and Germany tax a share by age at start. That share is fixed for life. Details in how Europe taxes a US annuity; the Spanish wealth tax is on the Spain page.
- Who it fits. See who a deferred annuity fits, and the full wealth tax by country table.
Assumptions: non-qualified (after-tax) US annuity, life only, owner a US citizen resident abroad. Rules change; get a local tax adviser’s written view. I am a US-licensed insurance agent and do not give foreign tax advice. This is education, not tax advice.
Married? Make the income outlive either of you. In Norway only the sponsoring spouse’s income counts, so the annuity is owned by and pays the sponsor. A joint and survivor payout then keeps paying the other spouse after the sponsor dies. If a single-life annuity is on one spouse and that spouse dies first, the payments stop, and the surviving spouse may have to show income of their own at the next renewal. A joint and survivor annuity, which keeps paying until the second death, or a separate annuity on each spouse closes that gap. Joint and survivor pays less per dollar than single life, so ask for both quotes and compare.
Frequently asked questions
Related reading
- Moving abroad on a fixed income: the hub
- Wealth tax by country and US annuities
- How Europe taxes a US annuity
- The exclusion ratio abroad
- Deferred income annuities: who they fit and who should skip
- How an American lowers Norway wealth tax
Sources
- 26 U.S.C. 72 (exclusion ratio; 72(q)(2)(I) and 72(u)(4) immediate annuity; 72(q)(2)(D) life payments)
- IRS: United States and Norway income tax convention (Articles 18, 22, 23)
- Kanton Zurich Steuerbuch ZStB 45.1 (annuities and wealth tax)
- ESTV Mitteilung 025-DVS-2025 (taxable share of foreign life annuities)
- Skatteetaten, Skatte-ABC 2025/2026 F-24 Livrenteforsikring (F-24-2.1 wealth, F-24-5.1 income)
- BOE: Ley 35/2006 IRPF, art. 25.3 (rentas vitalicias)
- Gesetze im Internet: EStG section 22 (Ertragsanteil)
- Federal Reserve H.10 via FRED: NOK per USD (and EUR, CHF, GBP, MXN series)
Goldstein & Co. LLC dba Goldstein Insurance Services · Hans Goldstein, licensed insurance agent, CA lic. #4273294 · NPN 20602398 · 213-414-2808 · hans@hansgoldstein.com
Education, not tax, legal or immigration advice. Rules, thresholds and exchange rates change; confirm with the consulate or immigration authority and a local tax adviser before you act, and get answers in writing. Hans Goldstein is a licensed insurance agent (CA 4273294) and can only offer annuities to residents of states where he is licensed. Annuity payments are guaranteed by the issuing insurer’s claims-paying ability, not by any government. Payout figures are illustrations from a published survey, not quotes. Immediate annuities are generally irrevocable.