PFIC — Passive Foreign Investment Company.
A non-US company earning mostly passive income or holding mostly passive assets — which describes virtually every UK fund, OEIC, unit trust and ETF. For US persons, holding one triggers the most punitive tax regime in the code.
Figures on this page are stated for tax year 2025/26 UK · 2025 US. Thresholds change annually.
Why your ISA is on this page
The test is mechanical: 75% passive income or 50% passive assets makes a fund a PFIC, and pooled investments pass it by construction. The default 'excess distribution' treatment spreads gains over your holding period, taxes each slice at that year's top rate, and adds interest — routinely exceeding 50% of the gain.
QEF and mark-to-market elections can rationalise the treatment where available; where they aren't, the arithmetic often favours selling and rebuilding in US-domiciled, HMRC-reporting ETFs.
- Form 8621 required for each PFIC, each year
- ISA and SIPP wrappers do not block PFIC status
- Treatment is fixable — but only prospectively, so timing matters
Last reviewed · Figures stated for tax year 2025/26 UK · 2025 US. Thresholds and rates change annually — check figures against the current tax year before relying on them.
Think you're holding PFICs?
You probably are. Send the holdings list and we will quantify it properly.