Question: How Can I Check My PFIC Status?

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..

How is a PFIC taxed?

All capital gains from the sale of PFIC shares are treated as ordinary income for federal income tax purposes and thus are not taxed at preferential long-term capital gain rates (Sec. 1291(a)(1)(B)).

Do I need to file Form 8621?

Together with your tax return, you need to file Form 8621. This applies for each separate PFIC you are a shareholder if you: receive direct or indirect distributions from a PFIC. recognize a gain on a direct or indirect disposition of PFIC stock.

What is G election?

The “G” election, provided for under U.S. Treas. … The G election allows the U.S. individual shareholder of a CFC or PFIC/QEF to report and pay U.S. tax on undistributed income from a CFC or PFIC/QEF in the same year for both regular tax and net investment income tax purposes.

Who should file Form 8621?

A U.S. person that owns stock of a foreign corporation and elects to treat such stock as the stock of a qualifying insurance corporation under the alternative facts and circumstances test within the meaning of section 1297(f)(2) must file a limited-information Form 8621.

How do you identify a PFIC?

The income test tells you to determine if 75 percent or more of the gross income of the corporation is passive. If it is, the corporation is a PFIC. The asset test tells you to determine if 50 percent or more of the corporation’s assets are passive or are held for the production of passive income.

What are ETFs in trading?

ETFs are funds that issue shares, which are traded on a stock exchange. ETFs cover a broad range of asset classes and can give exposure to specific markets, sectors or investment strategies. Many ETFs track an index in order to provide this return.

Is a foreign bank a PFIC?

The 1986 law exempted foreign banks and securities dealers that were licensed in the United States from being classified as PFICs. The new regulations deal with the status of foreign banks, financial institutions and securities dealers that are licensed to practice in their own countries but not in the United States.

Can you be a PFIC and a CFC?

PFIC/CFC overlap A CFC earning Subpart F income generally will meet the criteria to be considered a PFIC as well. … The shareholder would be subject to the excess distribution rules, but the shares would then be eligible for the PFIC exception going forward.

What is a form 8621?

Form 8621 is also known by a longer name: Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. This form is required if you are a shareholder of a company or fund that can be defined as a PFIC or QEF, and that was formed outside of the US.

How is excess Pfic calculated?

To do the math and compute total excess distributions:Figure out the total distributions received from the PFIC during the current year.Add up the total distributions received from the PFIC during the three prior years, divide by three, then multiply that by 1.25.More items…•

Are ETFs considered PFICs?

As these securities primarily hold investments that are passive in nature they are generally considered to be PFICs. Exchange Trade Funds (ETFs) listed on a Canadian stock exchange are generally PFICs; however, ETFs listed on a U.S. stock exchange that are set up as U.S. domestic entities are not.

What is PFIC Annual Information Statement?

The PFIC Annual Information Statement contains information to enable you, should you so choose based on the advice of your tax advisors in light of your personal tax circumstances, to elect to treat the Golden Queen entity as a qualified electing fund (“QEF”).

What income is subject to Gilti?

What is global intangible low-taxed income and how is it taxed under the TCJA? GILTI is the income earned by foreign affiliates of US companies from intangible assets such as patents, trademarks, and copyrights. The Tax Cuts and Jobs Act imposes a new minimum tax on GILTI.

Can US investors buy Ucits?

While a UCITS fund may be marketed to European retail investors, a UCITS fund may not be marketed to U.S. retail investors without registration of the offering under the Securities Act, and registration of the UCITS fund under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

What is a QEF?

A QEF, or Qualified Electing Fund, is a PFIC for which you have made a special election. The tax treatment of a QEF is better than the other two ways of taxing PFICs: the excess distribution rules of I.R.C.

What is passive money?

Passive income is earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved. As with active income, passive income is usually taxable. However, it is often treated differently by the Internal Revenue Service (IRS).

Who can make a QEF election?

Each year, a U.S. person with an ownership interest in a PFIC must report each PFIC holding on a separate IRS Form 8621. On this form, taxpayers may, if they choose, make a Mark-to-Market election or a Qualified Electing Fund (QEF) election if these elections are available.

How do I avoid PFIC status?

A U.S. shareholder can avoid the PFIC interest charge and the conversion of capital gains into ordinary income by timely filing a QEF election.

What is Pfic testing?

A foreign corporation is a deemed passive foreign investment company (PFIC) if 75% or more of its gross income is from non-business operational activities (the income test), or at least 50% of its average percentage of assets is held for the production of passive income (the asset test).

What is a PFIC for US tax purposes?

The passive foreign investment company (PFIC) regime aims to discourage US persons from forming a foreign corporation and using that company to invest in primarily passive investments, thereby attempting to shift income out of the US federal tax net.