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A PFIC is a passive foreign investment company, and it is a US tax term, not a Canadian one. The IRS treats a foreign corporation as a PFIC if 75% or more of its gross income is passive, or if at least half of its assets produce or are held to produce passive income. It matters to you only if you file US returns.
Why does a PFIC come up for Canadians?
This page assumes you mean the tax term, since that’s what PFIC means in finance. The word shows up in Canada because some people in Canada are US persons and still file with the IRS. For them, a fund or company based outside the US can be a PFIC, and the IRS has special rules for it.
Think of Nina, a US citizen who has lived in Ottawa for years and files in both countries. She buys a fund through her Canadian bank, thinks nothing of it, and only hears the word PFIC from a preparer at tax time. That’s how it usually goes.
Whether a particular Canadian fund is one is a question for US tax law and for that fund. Nothing here can say yes or no for a named product, and none were checked. The IRS instructions for Form 8621 discuss the tests, so start there.
If none of this applies to you, stop here. No PFIC form exists on the CRA side.
What does the IRS ask you to file?
US persons generally file Form 8621 for each PFIC they hold. The IRS says to file in five situations: you receive distributions from a PFIC, you recognize a gain when you dispose of the shares, you report a qualified electing fund or mark-to-market election, you make another election listed in Part II, or you file an annual report required by the Code.
| Question | What the IRS instructions say |
|---|---|
| Income test | 75% or more of gross income is passive |
| Asset test | At least half of average assets produce passive income or are held for it |
| How many forms | One Form 8621 for each PFIC |
| Small holdings | Part I can be skipped at $25,000 or less in total PFIC stock ($50,000 on a joint return), unless you had excess distributions or gains |
| Indirect holdings | Part I can be skipped at $5,000 or less |
Those thresholds come from the IRS instructions revised in December 2025. They can change, so read the current form before you rely on them.
Is there a Canadian form that looks like this?
Not the same thing, but close enough to trip people up. The CRA’s Form T1135 page is where the foreign income verification statement lives. It covers specified foreign property, and Canadian residents whose foreign property cost more than $100,000 at any time in the year must file it. Which of your holdings count as specified foreign property is a CRA definition, so read it before you decide.
Two different countries, two different forms, and neither one replaces the other.
What does the tax look like? A Canadian-side example
Only the Canadian half can be shown. Say you live in Ontario with $80,000 of other taxable income and sell units of a fund for a $10,000 gain. The capital gains tax calculator shows $1,482.50 of extra Canadian tax, because half the gain is added to your income. That’s about 14.8% of the gain, a ballpark for what the CRA would take. The same gain under US PFIC rules can work out very differently, and our tools don’t model that.
Distributions are a separate Canadian question. If a fund pays you dividends rather than capital gains, use the dividend tax calculator. To compare what an investment returned before any tax, try the ROI calculator.
What should you do first if you think you hold a PFIC?
Take it in order. First, confirm you really are a US person for tax purposes. Second, list every fund and foreign company you hold, including ones inside registered accounts. Third, ask the fund or your bank what information it can give you about its income and assets, since the tests depend on that. Fourth, read the Form 8621 instructions to see which of the five filing situations fits your year.
It’s slow work, but doing it once means you don’t repeat it in a panic every spring.
What goes wrong most often?
Assuming a fund is fine because your Canadian bank sold it to you. The PFIC tests look at what the company is, not where you bought it. So a fund can be a PFIC for a US person even when everything about it looks ordinary in Canada.
The second is forgetting the form in a year with no sale. Distributions and elections also trigger Form 8621, so a quiet year isn’t always a no-filing year.
If you really are a US person with foreign funds, a tax preparer who does both US and Canadian returns earns the fee here. No fees were verified for this page. Ask what they charge for Form 8621 before you start.
Where we got these figures
The PFIC definition, the filing situations and the thresholds come from the IRS instructions for Form 8621 (revised December 2025). The T1135 rule comes from the Canada Revenue Agency‘s foreign reporting pages. The example uses our 2026 federal and Ontario data and the 50% capital gains inclusion rate, which couldn’t be confirmed for 2026 on a CRA page, so check it. This website has no connection with the CRA or the IRS.
Frequently asked questions
What does PFIC stand for?
Passive foreign investment company. It is a US tax term, defined in the IRS instructions for Form 8621.
Do I report a PFIC to the CRA?
There is no PFIC form for the CRA. The CRA has Form T1135 for specified foreign property costing more than $100,000.
Who files Form 8621?
US persons who hold a PFIC and receive distributions, recognize a gain, or make or report certain elections. One form is filed per PFIC.
Is every Canadian mutual fund a PFIC?
We could not confirm that for any named fund. It depends on US tax law and on the fund, so check the IRS instructions.
Is there a minimum holding before Form 8621 is needed?
Part I can be skipped at $25,000 or less in PFIC stock, or $50,000 on a joint return, unless you had excess distributions or gains.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill