Is a SICAV a PFIC Taxable and Reportable in the US?
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Is a SICAV a PFIC for IRS Filing
Is a SICAV a PFIC for IRS Tax and Reporting: Depending on which country you maintain your foreign or offshore assets, one type of foreign investment you may have is referred to as a SICAV. A SICAV is a type of investment which is often seen in European countries. Technically, a SICAV is a société d’investissement à capital variable, but to you, it is a U.S. tax headache. The SICAV has components that mimic a mutual fund or ETF in the U.S.
In other words, there is a fund that is held in a company form that issues shares for investors to invest in.
Then, the investment manager of the fund invests the capital into various different securities.
Depending on the securities the fund invests in, this type of investment may be risk-heavy or risk-averse.
As a result, this may lead to significant tax and reporting consequences on a tax return – and may involve PFIC and Form 8621 – but not always.
Understanding SICAV Basics
The concept of a SICAV is the concept of aggregate investing by a fund into several underlying securities.
In other words, instead of purchasing one stock and putting all your eggs in one basket, the funds invests in various securities.
This is similar to a mutual fund in the United States.
As with mutual funds, the SICAV comes in all different shapes and sizes. In addition, depending on the specific type of SICAV and the country or origin, it will impact how it is regulated, and how the ownership is held amongst different investors.
Different countries have their own versions of SICAV.
Are All SICAV PFIC?
It depends on how the SICAV is structured.
One of the key components of the SICAV, which brings it into PFIC territory is that it is a fund owned by a company.
For a brief recap on PFIC’s relevant to a SIVAC, it is the fact that a PFIC may include foreign mutual funds, which makes it comparable to the SICAV.
A Foreign Mutual Fund is a contained investment vehicle held in a entity such as a corporation designated for the specific fund. The crux of it is that the reason why a SICAV maybe considered a PFIC is the same reason why a foreign mutual fund is considered a PFIC.
That is because the fund is housed in a company which is primarily comprised of passive assets and or assets generating primarily passive income.
How to IRS Report the SICAV in the US?
Generally, it is going to be reported on the FBAR if an account is associated with it — as well as a Form 8938 or 8621.
Since technically when a person invests in the SICAV they will receive an account number or similar identification number, it is included on the FBAR even though ownership foreign corporations are generally not included on the FBAR (while the accounts held by a corporation are generally reportable.
If it is considered a passive foreign investment company, then it would be included on Form 8621, and if there were excess distributions, it will also include a very complicated excess distribution calculation.
How is a SICAV Taxed in US?
If the SICAV is considered a passive foreign investment company (“PFIC”) then each individual fund or SICAV must be dealt with separately in order to determine each SICAV’s share basis, shares owned, distributions, etc.
The SICAV would be taxed similar to a foreign mutual fund based on how long each fund is been held, reinvested dividend values, etc.
What if you Missed SICAV IRS Compliance?
If you’re out of compliance for prior years and need assistance with offshore disclosure, we can help you safely get into offshore compliance.
Golding & Golding: About our International Tax Law Firm
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