Do I have to file 8621 every year?

The annual filing requirement Then, the PFIC shareholder must attach Form 8621 to its federal income tax return (or information return) each tax year, unless one of the exceptions discussed below applies. A PFIC shareholder must file Form 8621 for each PFIC the shareholder owns.

How is PFIC taxed in us?

The U.S. tax code categorizes non-U.S. registered mutual funds as Passive Foreign Investment Companies (PFICs). PFICs are taxed very punitively by the U.S. Furthermore, each PFIC must be reported annually on U.S. tax form 8621, which requires complex accounting and is very time consuming to complete.

What is the look through rule?

6 The CFC Look-Through Rule allows a U.S. corporation to shift profits among its overseas subsidiaries without triggering the tax bill that would normally be due. American corporations owe U.S. taxes on all their profits, wherever earned in the world, less a credit for any foreign taxes paid.

What is the penalty for not filing Form 8621?

Penalties for failure to file Form 8621 could include a $10,000 penalty (under Form 8938), and suspension of the statute of limitations with respect to the U.S. shareholder’s entire tax return until Form 8621 is filed.

Can I file Form 8621 separately?

Shareholders filing a joint return may file a single Form 8621 with respect to a single PFIC in which each joint filer owns an interest. Shareholders that are the first U.S. person in the chain of ownership.

How do you qualify to be a PFIC?

At least 75% of the corporation’s gross income is “passive”—that is, derived investments or other sources not related to regular business operations. At least 50% of the company’s assets are investments, which produce income in the form of earned interest, dividends, or capital gains.

Is the gain on sale of PFIC stock taxable?

At this point we know the gain on sale of your PFIC stock will be taxable. We just don’t know whether it will be capital gain (you owned some stock as an investment, and you sold it) or as ordinary income. The default PFIC taxation rule is in Section 1291. It is called the “excess distribution” rule.

What’s the difference between pre-PFIC and current year?

In other words, the pre-PFIC period is the period during which you held the fund but it was not yet a PFIC (in any year after 1986). It could also be the time that you owned the PFIC before you were a US person. Prop. Reg. §1.1291-1 (b) (1) (i), (3); 57 FR 11024. The second is the time period after the pre-PFIC period and before the current year.

How is tax calculated for prior years PFIC?

The taxation for the prior years PFIC period is complicated. For the amount allocated to each calendar year in this period, you apply the maximum tax rate for each year to that year’s portion of the gain, and then you calculate a daily compounded interest charge.

When is a PFIC ineligible for QEF or mark to market?

I’m going to assume that not only is the PFIC ineligible for the QEF treatment, but also that it was ineligible for Mark to Market treatment, as well (or that no Mark to Market election was made). When neither the QEF nor Mark to Market election is made, the PFIC is taxed according to the rules of Internal Revenue Code § 1291.