Are foreign index funds PFICs?

Are foreign stocks PFICs?

Stocks can be PFICs

If the foreign corporation meets either the income test or the asset test, it is a PFIC. Most publicly traded stocks are not PFICs, because they are businesses producing primarily non-passive income and holding primarily non-passive assets. Take Nestle stock, for example.

Are foreign reits PFICs?


A foreign corporation is a P.F.I.C. if either (i) 75% or more of its gross income for the tax year is passive income, or (ii) the average percentage of its assets during the tax year which produce or are held for the production of passive in- come is at least 50%.

How are international index funds taxed?

International funds are often taxed (once) at the issuing country’s tax rate. However, you may have to pay taxes twice if the issuing country has no tax treaty with the U.S. Putting investments into investment accounts like 401(k)s or IRAs ensures you are maximizing your tax-savings potential.

Are banks considered PFICs?

Financial institutions. Since a financial institution typically would earn interest income, and interest income generally is passive, every foreign financial institution would be prima facie a PFIC. There are two ways under the Code to potentially mitigate this result.

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What is considered a foreign mutual fund?

A foreign investment fund or corporation is considered a PFIC if either at least 75% of its gross income is passive income (i.e. from investments), or if at least 50% of its assets are held to produce passive income.

Can U.S. investors buy foreign ETFs?

U.S.-registered exchange-traded funds (ETFs).

An actively managed ETF that invests in non-U.S. assets can also give an investor international exposure along with the same ability to trade the ETF shares like any other exchange-traded security.

Are investment trusts PFICs?

Any foreign corporation which meets either of the asset or income tests is a PFIC. Typical UK types of investments which will be considered PFICs are UK unit trusts, UK ETFs, UK mutual funds, stocks and share ISAs (which contain PFICs).

How do I know if I have PFIC?

You can generally tell if a foreign corporation or foreign investment fund is considered a passive foreign investment company (PFIC) if it meets one of the following two characteristics: 75% or more of its gross income for the taxable year is passive income, or.


trusts (REITs) that do not primarily carry on an active business are PFICs.

Is Pfic a subpart F income?

A PFIC is Passive Foreign Investment Company. The income of a PFIC may be considered similar to Subpart F, but the CFC (Controlled Foreign Corporation) rules are not required.