Passive foreign investment company
Provisions of United States tax law / From Wikipedia, the free encyclopedia
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For purposes of income tax in the United States, U.S. persons owning shares of a passive foreign investment company (PFIC) may choose between (i) current taxation on the income of the PFIC or (ii) deferral of such income subject to a deemed tax and interest regime.[1] The provision was enacted as part of the Tax Reform Act of 1986 as a way of placing owners of offshore investment funds on a similar footing to owners of U.S. investment funds (regulated investment companies).[2] The original provisions applied for all foreign corporations meeting either an income or an asset test. However, 1997 amendments[3] limited the application in the case of U.S. Shareholders of controlled foreign corporations.