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Passive Foreign Investment Company

What We Do

There are several traps your business can unknowingly walk into. If you are an investor in a foreign mutual fund or any other passive foreign holding company, you will have a potentially higher tax bill than an investor in domestic (U.S.) assets.

PFIC Provisions Are Complex

PFICs are subject to complicated and strict tax guidelines by the Internal Revenue Service (IRS), which covers the treatment of these investments. Both the PFIC and the shareholder must keep accurate records of all transactions, including share basis, dividends and any undistributed income earned by the company.

If you are the owner of a PFIC, there are a number of potential tax elections that need to be considered in order to mitigate the possible punitive provisions that can kick in when you receive distributions from your investment or upon sale of your investment.

Reportable PFICs

It should be noted that there are several situations whereby taxpayers may have reportable PFICs and are not aware of it. A few examples include:

  • Foreign pension plans (i.e. a Superannuation) that holds foreign mutual funds. The earnings in the pension are not taxed in the foreign country but can be taxable and reportable in the U.S.
  • U.S. citizens living abroad that own shares in a private company that has passive investments.
  • U.S. citizens living in Canada with investments in Tax Free Savings Accounts (TFSAs) or Registered Education Savings Plans (RESPs) that hold foreign mutual funds.

Your Expert

William S. Iannarelli, CPA

Director

Are you looking for Foreign Bank Account Report Services from a New York CPA firm?

If so, simply fill out the form below or call us at 716.847.2651 for more information.