FATCA – Information Reporting for Passive Foreign Investment Companies

U.S. shareholders of passive foreign investment companies (PFICs) must file an annual information return containing information required by the IRS.

A U.S. Person who is a PFIC shareholder must file IRS Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or Qualifying Electing Fund, for each tax year in which that person:

1. Recognizes gain on a direct or indirect disposition of PFIC stock.

2. Receives certain direct or indirect distributions from a PFIC.

3. Makes a reportable election.

Under IRC §1298, a U.S. Person who is a PFIC shareholder must file an annual report containing information required by the IRS. Since a PFIC shareholder only reports information required by the IRS, Code §1298(f) does not require any reporting until the IRS issues guidance (this provision is contingent upon IRS instructions).

In addition to the Code §1298(f) an individual who is a PFIC shareholder can also be required to disclose annual information under new Code §6038(D) (i.e., accounts in excess of $50,000).

IRC §1298(f) applies to all U.S. Persons. In contrast, only individuals are subject to IRC §6038(D) (unless the IRS issues guidance requiring annual information disclosure for domestic entities).

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