Investing in PFICs – Don’t let IRS reporting stop you from global opportunities

Sovereign Confidential

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Finding a great investment opportunity is not the easiest job on the planet, especially if you limit yourself to only one country.


It makes a lot of sense to expand your universe of investment options beyond your own backyard, especially if you are from a Western country with very mature financial markets and universally low yields.


However, depending on your nationality and residence, investing overseas can mean additional tax reporting and sometimes even higher taxation.


For example, our US-based readers (US persons for tax purposes) should be careful when investing in Passive Foreign Investment Companies (PFICs) - as the name suggests, foreign corporations primarily investing in passive assets.


Most foreign mutual funds might be PFICs, as well as many foreign investment trusts and funds.


It’s important to identify PFICs correctly before you invest because the IRS loves to tax them... and demands additional PFIC-related reporting.


Still, if you are a US taxpayer, you should not avoid a great investment just because it’s a PFIC.


First, if you invest in a PFIC via your US retirement accounts, such as IRA or 401k, none of the PFIC-related issues will even matter.


And second, even if you use your usual (not retirement) savings to invest…




  1. The punitive, PFIC-related taxation can be usually avoided, and

  2. You can delegate the complicated reporting to seasoned professionals (and do it very inexpensively)


In today’s alert, you will learn how to do both things...and we will explain why exactly the IRS doesn't like PFICs, how PFICs are taxed. Finally, we will provide plenty of PFIC examples that you may encounter when investing overseas.

Finding a great investment opportunity is not the easiest job on the planet, especially if you limit yourself to only one country. It makes a lot of sense to expand your universe of investment options beyond your own backyard, especially if you are from a Western country with very mature financial markets and universally low…

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