Passive Foreign Income Companies

Investment income derived from the active conduct of an insurance business from causing a foreign corporation to be a passive foreign investment company pfic.

Passive foreign income companies. This act is becoming increasingly important and has as its main initiative the monitoring of the financial accounts of the persons who live outside the united states or whether us citizens currently residing in the us or not have earnings they do not report. Common examples include foreign mutual funds and. The passive income test requires that a passive foreign investment company derive at least 75 percent of its gross income from passive income. Exception to passive income characterization of certain insurance companies with respect to passive foreign investment companies tcja treasury regulations that are identified as major regulations are subject to review by omb s oira before being issued pursuant to executive order 13771.

The foreign account tax compliance act well known as fatca concerns a united states federal law which was enacted on march 18th 2010. This supplementary information is often where information on passive foreign investment companies pfics is located. The northeast is the epicenter of non disclosure. The irs requires u s.

A foreign corporation that meets either the income or asset test described below. 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. Pfics are a serious matter and require great consideration with reporting and elections. Failing that a pfic must pass the passive asset test which requires that 50 percent of its assets come from investments.

These assets may be dividends capital gains or interest. The irs defines a pfic as. Certain start up companies are also at risk of being. Persons owning shares of a passive foreign investment company pfic may choose between i current taxation on the income of the pfic or ii deferral of such income subject to a deemed tax and interest regime.

Owners of a pfic to report ownership of their passive foreign investment companies on form 8621. The 2017 tax law amended this exception in the pfic rules to apply only to a foreign corporation whose applicable insurance liabilities. Foreign mutual funds typically are considered pfics because they are foreign corporations that generate more than 75 of their income from passive sources such as capital gains and dividends fitzsimmons downturn begets pfic status 17 canadian tax highlights 2 february 2009. Yet from a very good source less than half of those pfic s came forward.