Starting with the 2014 tax year, CI Investments Inc. will provide additional tax information to U.S. taxpayer clients to help them file their American tax returns, the firm announced on Thursday.
Upon request, CI Investments will provide clients with passive foreign investment company annual information statements (PFIC). These statements may allow clients to receive more favourable tax treatment of their CI mutual fund investments, according to CI Investments.
The statements set out the investor’s pro-rata share of a fund’s ordinary earnings, net capital gains and other information in accordance with tax legislation. The form will allow U.S. clients to elect to treat a CI fund held in an open account as a qualified electing fund (QEF) on their tax return.
Under U.S. tax law, Canadian mutual fund trusts and corporations are considered PFICs, which are subject to strict rules designed to limit U.S. taxpayers’ ability to defer tax through foreign investments. With the QEF election, the tax treatment of Canadian mutual fund holdings held in open accounts will be similar to that of U.S. mutual funds.
Currently, Canadian mutual funds held in registered retirement plans, including registered retirement savings plans (RRSP) and registered retirement income funds (RRIF), are exempt from PFIC reporting requirements. However, other registered plans, including registered education savings plans (RESP), registered disability savings plans (RDSP) and tax-free savings accounts (TFSA), are not exempt.