Passive Foreign Investment Company (PFIC) – What the heck is that?
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Over the years, we’ve helped countless new clients clean up an issue that could have been avoided with better planning: the surprising tax implications of non-US mutual fund investments for US taxpayers.
In short, when a foreign corporation has over 50% passive income or over 50% of passive assets in a single tax year, it is considered a Passive Foreign Investment Company (PFIC). This means virtually all foreign mutual funds, including indirect investments through pension plans or life insurance policies, are PFIC’s.
The downsides to PFIC taxation can be significant. For every PFIC investment, you are required to file separate forms and disclosures, which makes tax compliance much more costly. And, when selling a PFIC, you are hit with punitive tax rates and interest charges, stretching back to the original purchase date.
All that said, there may be instances where the potential upside of a PFIC investment outweighs the tax liabilities and compliance costs.
Our team of experienced tax professionals at US Tax Services AG has been helping US taxpayers navigate PFIC taxation and compliance for nearly two decades. So, if you have PFIC investments, don’t hesitate to contact us today to see how we can help assess your tax liabilities and the best path forward.
USTS
Learn how USTS can assist you with PFICS and other complicated issues, please contact us with questions at info@ustaxservices.ch
Over the years, we’ve helped countless new clients clean up an issue that could have been avoided with better planning: the surprising tax implications of non-US mutual fund investments for US taxpayers.
In short, when a foreign corporation has over 50% passive income or over 50% of passive assets in a single tax year, it is considered a Passive Foreign Investment Company (PFIC). This means virtually all foreign mutual funds, including indirect investments through pension plans or life insurance policies, are PFIC’s.
The downsides to PFIC taxation can be significant. For every PFIC investment, you are required to file separate forms and disclosures, which makes tax compliance much more costly. And, when selling a PFIC, you are hit with punitive tax rates and interest charges, stretching back to the original purchase date.
All that said, there may be instances where the potential upside of a PFIC investment outweighs the tax liabilities and compliance costs.
Our team of experienced tax professionals at US Tax Services AG has been helping US taxpayers navigate PFIC taxation and compliance for nearly two decades. So, if you have PFIC investments, don’t hesitate to contact us today to see how we can help assess your tax liabilities and the best path forward.
USTS
Learn how USTS can assist you with PFICS and other complicated issues, please contact us with questions at info@ustaxservices.ch
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