A PFIC, or Passive Foreign Investment Company, is a type of foreign corporation that is subject to special IRS tax rules. These regulations apply to certain foreign corporations that generate passive income such as dividends, interest, and capital gains rather than active income from business operations.
If you own shares in a PFIC, you may be subject to additional tax on the company’s income or gains. There are different rules and election options that apply to PFICs, so understanding how these rules may affect your tax situation if you own shares in a PFIC is important.
Actually, there is a good short rule for having PFICs: don’t!
There are numerous good alternatives that do not result in a penalty tax; after all, the goal is for the investment to generate revenue.
Expats Overseas has a large network of CPAs with the necessary qualifications, experience, and cost-effective services. Contact us for a free and no-obligation discussion of your options.
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