PFIC reporting requirements: Guide for US expats

PFIC reporting requirements apply to US taxpayers who own shares in Passive Foreign Investment Companies. These are foreign corporations that primarily earn passive income or hold passive assets.

If you're a US citizen or resident for tax purposes who invests in foreign mutual funds, ETFs, or similar vehicles, you may need to file Form 8621 every year and navigate some complicated rules in the US tax code.

Here's everything you need to know about how to stay compliant.

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What is PFIC, and who needs to comply with it?

A PFIC is a foreign corporation that generates most of its income from passive sources or holds assets primarily for producing passive income.

The corporation qualifies as a PFIC if it meets either of these tests:¹

• Income test: The corporation earns 75% or more of its gross income from passive sources, including interest, dividends, rental income, or capital gains
• Asset test: Half or more of the corporation's assets either produce passive income or are held for that purpose

Foreign mutual funds, ETFs, unit trusts, and some investment structures within foreign pension plans typically meet one or both tests because they hold portfolios of stocks, bonds, or other securities that generate passive returns.

US citizens, green card holders, and US tax residents must comply with PFIC rules if they own shares in these foreign corporations. This applies whether you live in the US or abroad.

Why do PFIC rules matter?

The IRS created PFIC rules to stop US taxpayers from deferring taxes on foreign investments that don't pay out earnings every year.

Without these rules, you could invest in a foreign fund, watch your gains grow tax-free, and only pay US taxes when you sold shares or took distributions years later.

PFIC taxation closes that loophole.

The default method taxes distributions and gains at high ordinary income rates and adds interest charges based on how long you held the investment. Because of this, you can actually end up paying more tax on a PFIC than you would on a similar US-based fund.

PFIC reporting requirements

Form 8621

Form 8621 is the main form for reporting PFIC investments. You need to file a separate form for each PFIC you own. You're required to report:

• Distributions you received from the PFIC during the tax year
• Gains from selling PFIC shares
• Tax elections you made, such as a qualified electing fund (QEF) or mark-to-market (MTM)
• Excess distributions if you're using the default tax method

The default tax method requires you to allocate distributions across the years you held the investment and calculate interest charges, which can get complicated.

Make sure to consult with a tax professional if you have any questions about how to file Form 8621.

Form 8938 (FATCA reporting)

Form 8938 isn't technically a PFIC reporting requirement. It's a separate FATCA requirement that applies to all foreign financial assets. But if you own PFICs, the two reporting obligations often overlap because PFIC shares count toward your total foreign asset value.

FATCA filing thresholds depend on where you live and your filing status.

If you live outside the US:²

If you live in the US:²

FBAR (FinCEN Form 114)

Similar to FACTA, FBAR isn't a PFIC-specific requirement. But if you hold PFIC shares in foreign accounts, these two reporting obligations often overlap.

You must file the FinCEN Form 114 if the total value of all your foreign accounts combined exceeded 10,000 USD at any time during the calendar year—that's the FBAR reporting threshold.¹

Are there any exceptions to PFIC reporting requirements?

Not everyone who owns PFIC shares needs to file Form 8621.

The main exceptions include:¹

• If your total PFIC holdings stayed below 25,000 USD (single) or 50,000 USD (married filing jointly) all year and you didn't receive distributions or sell shares, you're exempt from filing Form 8621
• PFICs held in certain foreign pension plans may be exempt depending on the pension structure and applicable tax treaty provisions
• If your PFIC also qualifies as a controlled foreign corporation (CFC), overlap rules under section 1297(d) may reduce PFIC treatment during part of your holding period (but it doesn't automatically eliminate Form 8621 requirements)

Consult a tax professional to figure out if you qualify for any of these exceptions.

What is Form 8621?

Form 8621 is the IRS form that reports your ownership and activity in PFICs (Passive Foreign Investment Companies).

It collects information about distributions you received, gains from selling shares, and any tax elections you've made to change how your PFIC income is taxed.

PFIC reporting process

1. Identify your PFICs

First, check whether your foreign investments qualify as PFICs. Common examples include:

• Foreign mutual funds
• Non-US ETFs
• Unit trusts
• Certain foreign hedge funds
• Some investment structures within foreign pension plans

If you're unsure, you can contact the fund manager or a tax professional.

2. Determine your PFIC reporting requirement(s)

Review whether you meet any of the Form 8621 filing triggers: receiving distributions, selling shares for a gain, making a tax election, or holding more than 25,000 USD (single) or 50,000 USD (married filing jointly) in total PFIC value at any point during the year.¹³

If you meet any trigger, you must file Form 8621 for each PFIC.

3. Choose a tax treatment method

You have three options for how PFIC income is taxed:¹

• Excess distribution method: The default method that taxes certain distributions at high ordinary income rates with added interest charges based on how long you've held the PFIC
• Mark-to-market election: You pay tax each year on any increase in your PFIC's value as ordinary income, available only if the shares are publicly traded
• Qualified electing fund (QEF) election: You pay tax annually on your share of the fund's earnings (even without receiving distributions), but the fund must provide certain financial information, which isn't always possible

If you're not sure which tax treatment method to choose, consult with a professional.

4. Gather documentation

You'll need documents like your purchase dates, sale dates, distribution records, account statements showing the value of your holdings throughout the year, and cost basis information.

If you're making a QEF election, you'll also need a PFIC Annual Information Statement from the fund.

5. Complete and file Form 8621

Fill out a separate Form 8621 for each PFIC. You need to report all required information and attach the forms to your tax return.

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Tips for the US citizens living abroad

If you live overseas, here are a few tips on how to manage PFIC reporting requirements:

• Before investing in a foreign fund, check whether it qualifies as a PFIC and whether the fund can provide the documentation needed for QEF elections
• Consider US-domiciled mutual funds or ETFs that hold international investments instead of foreign funds, as these aren't subject to PFIC rules
• Set calendar reminders for FBAR and tax return deadlines for expats so you don't miss required filings

Many US expats work with a tax professional to file their returns because PFIC reporting requirements need specialized knowledge.

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PFIC reporting requirements apply when you own foreign investment companies that generate passive income. If you meet the filing triggers, you'll need Form 8621 for each PFIC.

You may also need to report FATCA and FBAR, depending on your total foreign asset values.

These rules are complex, so consider consulting with a tax professional on the best way to handle these requirements.

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Sources

1. Taxes for Expats - PFIC explained
2. IRS - Summary of FATCA reporting for U.S. taxpayers
3. BrightTax - PFIC Form Requirements

Sources checked 05/14/2026