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PFIC Risk Checker
Canadian mutual funds and most Canadian-domiciled ETFs are "PFICs" under US tax law — one of the most expensive things a Canadian moving to the US can get wrong. See which of your accounts are exposed, and how the three ways the IRS taxes a PFIC actually differ. General information only, not tax or investment advice.
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Are you a US person for tax purposes?
PFIC rules only apply once you're a US person — a citizen, a Green Card holder, or a
resident under the substantial presence test. If none of those apply yet, this doesn't affect you today.
Where do you hold Canadian-domiciled funds?
For each account, answer for Canadian-domiciled mutual funds or ETFs
— funds whose legal home is Canada, even if they invest in US stocks. Individual stocks and bonds are not
PFICs, and a US-domiciled fund (even one bought through a Canadian brokerage) is not either.
What this means for you
How PFICs actually get taxed
Once you're a US person holding a PFIC, one of three regimes applies — and unlike
most of this site, there's no dollar estimate here. A real §1291 calculation needs your fund's full
distribution and NAV history with daily-compounding interest, which isn't something to approximate with
placeholder numbers.
Section 1291 — Excess Distribution (the default)
If you do nothing, this is what applies. Gains and "excess" distributions get
spread ratably across your entire holding period, with the portion allocated to prior years taxed at
the highest marginal rate in effect for that year — plus a non-deductible interest charge for the
deferral, as if the IRS were owed that tax all along. It's the most punitive of the three, and the one
that catches people who never knew they had a choice.
QEF Election — Qualified Electing Fund (usually unavailable)
The fairest regime on paper — you're taxed annually on your share of the fund's
ordinary income and capital gains, similar to a US mutual fund. The catch: it requires the fund itself
to publish a "PFIC Annual Information Statement" every year, and almost no Canadian mutual fund or ETF
provider does this. In practice, QEF is rarely an option for a typical Canadian ETF holding, not just a
theoretical one.
Mark-to-Market Election (often the realistic choice)
Available for "marketable" PFIC stock — most exchange-listed Canadian ETFs qualify.
Each year, you mark any unrealized gain to ordinary income (no preferential capital-gains rate, and
losses are limited to prior MTM gains), but there's no interest charge and no retroactive
reallocation. Since QEF data usually isn't available, this ends up being the practical option for many
people holding exchange-listed Canadian ETFs.
What people commonly do about it
Not tax, legal, or investment advice
PFIC rules are complex and fact-specific — what's below is general information
about common approaches, not a recommendation for your situation. Talk to a cross-border tax specialist
before acting on anything here, especially before making an election or liquidating a holding.
Switch to US-listed equivalents going forward
Most Canadian ETFs have a US-listed equivalent tracking the same index — moving new
contributions there sidesteps the PFIC regime entirely for anything bought afterward. It doesn't
retroactively fix funds you already hold.
Consider liquidating before becoming a US person
Selling Canadian-domiciled funds while still a non-US-person, then rebuying US-listed
equivalents, avoids the PFIC issue altogether for that position and resets your cost base under
ordinary Canadian tax rules instead. This is most relevant for TFSA, RESP, and FHSA holdings, since
those accounts get no treaty shelter at all once you're a US person.
Form 8621, per fund, per year
Once you're a US person holding a PFIC (above the filing thresholds), Form 8621 is
generally required for each PFIC, each year, regardless of whether you made an election or even
realized any gain — a paperwork obligation independent of which regime applies.
❓ Glossary
- PFIC
- Passive Foreign Investment Company — US tax law's label for a non-US mutual fund, ETF, or pooled investment vehicle. Determined by where the fund is legally domiciled, not what it invests in — a Canadian-domiciled ETF holding only US stocks is still a PFIC.
- Form 8621
- The IRS form used to report each PFIC you hold and make (or continue) an election, filed annually alongside your US tax return.
- QEF
- Qualified Electing Fund — an election taxing you annually on your share of the fund's actual income, available only if the fund publishes the required annual information statement.
- Mark-to-Market (MTM)
- An election taxing unrealized gains on a "marketable" PFIC as ordinary income each year, in exchange for avoiding the §1291 interest charge.
- Excess distribution
- The default §1291 regime that applies when no election is made — spreads gains/distributions above a threshold ratably across your holding period and taxes the prior-year portions at the top marginal rate, plus interest.
Figures current as of 2026
- 2026 — PFIC regime descriptions reviewed against current IRS Form 8621 instructions and Treasury regulations under IRC §§1291-1298.
- Last independently verified: August 2026.
- Full sourcing & citations for this page →