Passive Foreign Investment Company (“PFIC”) rules aim to prevent the deferral of income in non-US companies from the US income tax net. It denies US investors the benefit of deferral of US taxation on all passive investments channelled through non-US companies.
Many life science companies are regarded as PFICs for US purposes as a result of the cash reserves held in the balance sheet. This Guidance Note outlines the definition of a PFIC, the tax implications of holding PFIC shares and the elections available to shareholders under the PFIC rules.
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