Treasury Issues Guidance on Passive Foreign Investment Companies



On July 11, 2019, the Department of the Treasury and the Internal Revenue Service issued proposed regulations regarding the determination of ownership in a passive foreign investment company (PFIC) and the treatment of certain income received or accrued by a foreign corporation and assets held by a foreign corporation. The regulations provide guidance regarding when a foreign corporation is a qualifying insurance corporation (QIC) and the amounts of income and assets that a QIC excludes from passive income and assets. The regulations also clarify the application and scope of certain rules that determine whether a U.S. person that directly or indirectly holds stock in a PFIC is treated as a shareholder of the PFIC, and whether a foreign corporation is a PFIC. The regulations affect U.S. persons with direct or indirect ownership interests in certain foreign corporations.

These proposed regulations are proposed to apply to taxable years of U.S. persons that are shareholders in certain foreign corporations beginning on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register. However, until these regulations are finalized, taxpayers may choose to apply these proposed regulations in their entirety to all open tax years as if they were final regulations, provided that taxpayers consistently apply the rules of these proposed regulations. In addition, taxpayers may continue to rely on Notice 88-22 until these regulations are finalized.


For more details on the key items included in the proposed regulations, read the full BDO USA Article here.

If you have any questions about how this proposed regulations might affect your foreign investments, please contact us for a consultation.