PFIC (Passive Foreign Investment Company)

A PFIC is a non-US corporation that meets either the income test (≥75% passive income) or the asset test (≥50% of average assets producing or held to produce passive income). Conventional foreign mutual funds and UCITS ETFs commonly meet one or both tests, but the legal vehicle and annual facts control. When no valid election applies, the default §1291 excess-distribution regime can allocate gains or excess distributions across the holding period at the applicable highest rates and add an interest charge. QEF requires a fund-provided PFIC Annual Information Statement; mark-to-market is limited to qualifying marketable PFIC stock. A confirmed PFIC is generally analyzed on a separate Form 8621, subject to reporting triggers and exceptions.