PFIC Statement services

As a (U.S.) investor in a company classified as a Passive Foreign Investment Company (PFIC), you have an obligation to prepare and submit a PFIC statement. TMF Group can perform this task for you, making sure that your PFIC statement is prepared correctly together with the related tax forms.

What is a PFIC

From a US perspective, a PFIC is a foreign-based company that meets one of the following two criteria:

  • Income test
    At least 75% of the company’s gross income is “passive”, i.e. income derived from investments rather than from a company’s regular business operations.
  • Asset test
    At least 50% of the company’s assets comprise of investments producing income as earned interest, dividends or capital gains.

Subordinated Notes issued by a European CLO transaction are considered equity for US tax purposes. As such, and assuming you have made the “qualified electing fund” (“QEF”) election, your pro rata share of ordinary income and net capital gains of your investment will need to be reported to the IRS in a PFIC statement.

Reporting on an accrual basis requires accounting for your investment beyond the distributions you have received. TMF Group has the experience and insight to do this accounting effectively, consistently and efficiently.

Meet tax reporting deadlines

When investing in a PFIC each tax year, a PFIC statement must be filed with the IRS. TMF Group, in close cooperation with a U.S.-based tax advisor, has the framework in place to prepare your PFIC statement in a short and efficient timeframe. This will allow you to meet your tax reporting deadlines with a minimum of hassle.

We have the ability to analyse all income including the so-called phantom income of a PFIC which needs to be reported to the IRS under your QEF election. In accordance with US tax regulations we can derive the phantom income by calculating the relevant income items as stated below:

  • Gains and losses
  • Amortisation
  • Accrued income
  • Interest Income deferred to Note Principal Payment

Unrivalled knowledge and experience

We specialise in accounting for CLO/CDO transactions. TMF Group played a pioneering role in managing the first wave of securitisation structures in the US in the 1970s and then in Europe in the 1990s. TMF Group was engaged in managing the first European CDO transactions in 1999 and the first major European synthetic CDO transaction in 2002.

Currently, TMF Group administers around 250 CLO/CDO structures and actively works with the majority of Investment Managers, Collateral Administrators, Trustees and Arrangers. As Corporate Service Provider and Director of these transactions, we have in-depth knowledge about the investments and related transactions required to efficiently and consistently prepare your PFIC statements. Our services include:

  • Retrieving of relevant data - cash flow data and monthly reports from the Trustee
  • Liaising with the Investment Manager where needed
  • Running the data through our proprietary, proven and state-of-the-art software system to produce a balance sheet as well as a profit and loss statement for US tax reporting purposes
  • Preparing the PFIC statement and the related tax forms such as Form 5471

Interested in our PFIC Statement Services or have any questions? Please fill in our ‘Make an enquiry' form today, with details of your PFIC request and we’ll get in touch.

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