Our paper outlines major takeaways for U.S. taxpayers who have invested in a Passive Foreign Investment Corporation (PFIC), namely:

  • Tax treatment of PFICs is highly punitive compared to U.S.-domiciled funds. It explains the filing requirements for shareholders and details three tax elections for reporting PFIC information, including:
  1. The Qualified Electing Fund (QEF) Election
  2. The Mark-to-Market Election
  3. The Default, or “Do Nothing,” Approach
  • Beyond high tax rates, the stringent tax reporting requirements surrounding PFICs make it time-consuming and expensive to properly comply.
  • One of the most effective ways to mitigate the negative financial consequences of PFIC ownership is to invest using individual securities.

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Independent research with expert insights
The Global Financial Planning Institute has 10+ years of expertise in cross-border finances. We’ve analyzed years of independent data for insights into a comparison of managed fund investments across multiple countries.