A Passive Foreign Investment Company, or PFIC, is a foreign corporation that meets certain conditions outlined by the Internal Revenue Service (IRS). The most important conditions are the income test, which requires that 75% or more of the corporation's gross income be derived from non-business activities, and the asset test, which requires that at least 50% of the corporation's assets be held for the purpose of producing passive income.

The tax benefits that U.S. individuals previously obtained by owning shares in PFICs have been discontinued, as the IRS has closed tax loopholes that allowed taxpayers to avoid taxation on certain types of foreign income. As a result, U.S. investors who own shares of a PFIC must file Form 8621 in order to report their holdings.

Although the filing of Form 8621 is mandatory, the IRS can waive the requirement in certain cases. For instance, if the investor's interest in the PFIC is less than a certain threshold, they may be exempt from the requirement. Furthermore, investors do not need to file Form 8621 if the PFIC is disregarded for U.S. tax purposes, meaning that it’s treated as an non-U.S. corporation.

It is important to note that PFICs are subject to strict and extremely complicated tax guidelines by the IRS. Many investors find it beneficial to seek help from a qualified tax advisor when dealing with PFICs in order to ensure that they comply with the relevant tax rules and regulations.

PFICs are common investments for U.S. investors who wish to diversify their portfolios and gain exposure to international markets. Despite the complex rules and regulations, many taxpayers feel that the benefits of holding PFICs outweigh the costs.