Insurers call for PFIC guidance from US Treasury

23 July 2018

GFIA has written to the US Treasury to call for guidance to assist insurers and their investors in complying with the Passive Foreign Investment Company (PFIC) insurance exemption, as amended by the 2017 US tax reform law.


GFIA said that such guidance would be essential in 2018,since PFIC classification for the year is irreversible. Companies need the guidance to determine whether they will be able to maintain their non-PFIC status by meeting the qualifying insurance corporation (QIC) test.


It added that US shareholders will be significantly impacted by PFIC characterisation. Guidance is critical as early as possible to provide affected companies sufficient time to make structural and capital related decisions, if necessary, which may affect their QIC status.


GFIA warned that, without further guidance, a non-US parented insurance group may not be able to determine if it is characterised as a PFIC for the current year, and its US shareholders would be the ones subject to US tax consequences, such as higher tax obligations and payment of estimated tax and penalties.


It is important that non-US parented insurance groups can determine their QIC exemption status, so as to advise their shareholders of a possible PFIC classification. To make this assessment, insurance groups need clarification of the rules for qualifying as a QIC.


GFIA also called for guidance on the following topics:

  • Clarifying that a US insurance company is a QIC.
  • Providing methods for electing an exemption tied to a facts and circumstances test.
  • Providing guidance on the scope of the alternative facts and circumstances test as provided in the new law.

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