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Global Tax ComplianceUS Investor Tax Reporting
PFIC or K1 Investing in a “Passive Foreign Investment Company” (PFIC), broadly a non-US based corporation, requires US citizens to file a tax return form annually declaring direct or indirect distributions they received as well as gains recognised on a direct or indirect disposal of PFIC stock.
On the other hand, every US partnership must file a tax form (K1) unless it neither receives income nor reports expenditures for income tax purposes. Entities formed as LLC follow the same reporting requirements.
Connect, comply, rely
Do you have US investors in your fund? A question you have probably heard all too frequently as the topic of FATCA continues to gain in popularity. However, beyond the scope of FATCA, providing your US investors with the right US tax reporting allows them to properly optimise their US tax return filings.
Although this type of US tax reporting for investors is not new, investors are becoming increasingly sophisticated and are demanding more robust tax compliance.
As a result, there’s a steady rise in demand in the market for US Investor Tax Reporting. By being sensitive to the needs of your US investors and providing the necessary tax information, you can stand out from the competition and demonstrate your global compliance awareness.
A foreign corporation is a PFIC if it meets either of the following tests:
� Income Test: at least 75% of the corporation’s gross income for the tax year is passive (earnings an individual derives from rental property, limited partnership or other enterprise in which is not actively involved); or
� Asset Test: at least 50% of the corporation’s quarterly average of assets are held for the generation of passive income.
US Investor Tax ReportingIf your fund has US investors, then the entity classification for US tax purposes will determine the appropriate US tax reporting.
Check-the-box (CTB) election?
Most Lux funds, if not all, will qualify as a PFIC if they are classified as a corporation!
What is a Passive Foreign Investment Company (PFIC)?
Does the US view your fund as a flow-through entity (i.e. Partnership)? Then, Schedule K-1 reporting
might ensure compliance with US rules.
Is your fund treated as a non-flow-through entity (i.e. Corporation)? Then, PFIC reporting might be
appropriate for your US investors.
PFIC Reporting
Partnership Type* Sch. K-1 ReportingNon-US investment vehicles
Non-US investment vehicles
The CTB election allows non-US investment vehicles to choose whether they should be considered as a corporation or as a flow-through entity for U.S. tax purposes.
Corporation Type*
*From a US tax perspective
Benefits to you
How we can help
Best Practices of Asset ManagersAsset managers and administrators of funds should be aware of the local tax rules for non-resident investors for the jurisdictions into which their funds are distributed – for instance US tax issues related to US investors. By being aware of investor tax issues, and knowing your investors’ reporting needs, you can develop strategies to potentially increase your investor opportunities.
Our Joint Compliance SolutionWe have established a coordinated and joint effort with a US tax technical team to serve all of your US reporting needs and ensure excellence in the quality of our work. Together with your local Luxembourg team we will ensure a smooth and unmatched process.
BE CompetitiveStay ahead of market trends and gain a competitive advantage by supporting US tax reporting services
BE Forward ThinkingShow your global expertise and agility to new products (i.e. potential US reporting for new Lux Limited Partnership)
BE Service MindedEnhance your service offerings by being sensitive to the specific US investor’s tax reporting needs
BE DistinctDemonstrate your global compliance awareness by discussing US reporting opportunities with your US investors and promoters
BE ProactiveFollowing FATCA compliance, be prepared for possible higher demand for support related to US investor tax reporting
Our US Tax Reporting
Team A local Luxembourg team that knows you and your business combined with a
US team that has the expert reporting know-how
Range of Capabilities
Cost Efficient
Unique Approach
US & Lux Expertise
Expert assistance and advice with all your US tax reporting needs at both the investor and fund level
A joint and collaborative effort between our local firm and a US Tax Team to ensure the highest quality of service
Consistency, quality, and collaboration allows for a streamline process, thus creating competitive fees for the highest quality
A dedicated US Tax Team combined with your local Luxembourg team as the facilitator familiar with LuxGAAP and Luxembourg fund structures
© 2015 PricewaterhouseCoopers, Société coopérative. All rights reserved. In this document, “PwC Luxembourg” refers to PricewaterhouseCoopers, Société coopérative (Luxembourg) which is a member firm of PricewaterhouseCoopers International Limited (“PwC IL”), each member firm of which is a separate and independent legal entity. PwC IL cannot be held liable in any way for the acts or omissions of its member firms.
Our people working alongside you
Oliver Weber Tax Partner, AM Tax Leader+352 49 48 48 [email protected]
Michael DelanoAudit Partner, US Market+352 49 48 48 [email protected]
Fanny Sergent Audit Partner, Hedge Funds Leader+352 49 48 48 [email protected]
Jonathan PicardTax Senior Manager+352 49 48 48 [email protected]
Why PwC Luxembourg?
PwC Luxembourg (www.pwc.lu) is the largest professional services firm in Luxembourg with 2,450 people employed from 55 different countries. It provides audit, tax and advisory services including management consulting, transaction, financing and regulatory advice to a wide variety of clients from local and middle market entrepreneurs to large multinational companies operating from Luxembourg and the Greater Region. It helps its clients create the value they are looking for by giving comfort to the capital markets and providing advice through an industry focused approach.
The global PwC network is the largest provider of professional services in audit, tax and advisory. We’re a network of independent firms in 157 countries and employ more than 195,000 people. Tell us what matters to you and find out more by visiting us at www.pwc.com and www.pwc.lu.
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