What is a PFIC?
A PFIC is a foreign corporation that earns mostly passive income or holds mostly passive assets. Learn what makes an investment a PFIC, common examples, and the US tax consequences.
A Passive Foreign Investment Company (PFIC) is a foreign corporation that meets one of two tests: (1) 75% or more of its gross income is passive income (dividends, interest, rents, royalties, capital gains), or (2) 50% or more of its assets produce passive income. Most foreign mutual funds, foreign ETFs, and unit trusts are PFICs. US shareholders must file Form 8621 and may face punitive tax treatment under the excess distribution method unless they make a QEF or mark-to-market election.