Close
514 342-FISC (3472)
Question about mutual funds (form 8621) and US taxation

Dear M. Godbout,

I read on the internet that US citizens in Canada should not hold mutual funds here. I have some money coming in from the US from a land sale and need to strategize how it will be invested here. Is it dangerous for US citizens to have mutual funds here? What are the issues? Is this something we should have a consultation about, or is it quick to answer?

Thank you,

B.

Hello M. M,

I presume that you read articles about PFIC (Passive Foreign Investment Companies).

Mutual funds are often considered PFIC and therefore are subject to complex calculations and payment of tax (Form 8621).

But most of the time, we only file a simplified version and elect to treat it as a QEF (qualified electing fund).

Along with a special explanation letter, this basically allows you to declare in the US the same thing as here in Canada.

So, to simplify, having mutual funds only generates a little bit of paperwork (Form 8621), but does not create extra taxation.

Feel free to use mutual funds if it makes sense financially, do not let the tax aspect taint your decision.

Have a nice day,

Nicolas Godbout, M. Fisc., Pl. Fin.

2020 installment payments and COVID-19