A PFIC is any foreign corporation if 75% or more of its gross income for the taxable year consists of pas- sive income, or if 50% or more of the average value of its assets consist of assets that produce, or are held for the production of, passive income.
Are banks considered PFICs?
Active financing income.
Under the final regulations, only entities licensed as banks are eligible for the active financing trade or business exception to PFIC testing. This change is significant for investors in nonbank foreign finance companies because they now are subject to the PFIC regime.
What qualifies as a PFIC?
A passive foreign investment company (PFIC) is a corporation, located abroad, which exhibits either one of two conditions, based on either income or assets: At least 75% of the corporation’s gross income is “passive”—that is, derived investments or other sources not related to regular business operations.
Are foreign stocks PFICs?
Stocks can be PFICs
If the foreign corporation meets either the income test or the asset test, it is a PFIC. Most publicly traded stocks are not PFICs, because they are businesses producing primarily non-passive income and holding primarily non-passive assets. Take Nestle stock, for example.
Are foreign mutual funds PFICs?
Each of Your funds is considered to be a PFIC (Passive Foreign Investment Company). That is because the IRS hates Mutual Funds from overseas — so much so, that foreign mutual funds have been designated as PFICs for tax reporting purposes, which is very bad for tax purposes.
Can a publicly traded company be a PFIC?
Generally, a publicly traded foreign corporation will be classified as a PFIC if 50% or more of the average gross value of its assets, determined at the end of each quarter, is attributable to assets such as cash or cash equivalents that produce passive income.
Is a holding company a PFIC?
You must do it for each year that you own Holding Co to be sure it is not a PFIC. According to IRC §1298(b)(1), if a company was a PFIC previously in your holding period, it continues to be taxed as a PFIC for you now and in the future.
Can a foreign partnership be a PFIC?
Foreign partnerships can be considered PFICs by U.S. reporting standards depending on what type of income they generate. It is very easy not to pay attention to some PFICs that are imbedded in other investments vehicles, i.e. publicly traded partnerships.
Is a money market fund a PFIC?
What is a Passive Foreign Investment Company (PFIC)? PFICs are simply “pooled investments” registered outside of the United States. Pooled investments include foreign mutual funds, exchange-traded funds (ETFs), money-market funds, hedge funds and investments within non-U.S. insurance products.
Is a GIC a PFIC?
If you need to hold some fixed income in your non-registered account to keep the portfolio in balance, you could use GICs or high-interest savings products, neither of which are considered PFICs, so they would not require additional reporting.
Which funds are PFIC?
Finally, it should be stated clearly that PFICs are foreign REGISTERED funds, not funds that invest in foreign investments. For example, an Ireland registered fund that invests in U.S. stocks is a PFIC. A U.S. registered fund that invests in European stocks is not a PFIC.
How do you determine if a mutual fund is a PFIC?
You can generally tell if a foreign corporation or foreign investment fund is considered a passive foreign investment company (PFIC) if it meets one of the following two characteristics: 75% or more of its gross income for the taxable year is passive income, or.
Which ETFs are PFIC?
|Ticker||Vanguard ETF||Tax year|
|VUN||U.S. Total Market Index ETF||2019|
|VUS||U.S. Total Market Index ETF (CAD-hedged)||2019|
|VAB||Canadian Aggregate Bond Index ETF||2019|
|VCB||Canadian Corporate Bond Index ETF||2019|
What is considered a foreign mutual fund?
A foreign investment fund or corporation is considered a PFIC if either at least 75% of its gross income is passive income (i.e. from investments), or if at least 50% of its assets are held to produce passive income.