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April 16, 2013

Toronto, Ontario - April 16, 2013 - IFIC has made a submission to members of the U.S. Congress to propose that Canadian mutual funds be excluded from the Passive Foreign Investment Company (PFIC) rules. Under PFIC, distributions to and redemptions of Canadian mutual funds by U.S. persons are taxed as ordinary income, even when the investor has earned capital gains.

"There is sufficient similarity between the treatment (for income tax purposes) of mutual funds in Canada and the U.S. to support the exclusion of Canadian mutual funds from the PFIC rules," stated Joanne De Laurentiis, IFIC?s president and CEO.

The impact of these rules on the estimated one million American citizens residing in Canada include: a higher level of tax, potentially punitive tax charges, and significant compliance costs.

The PFIC rules are not targeted at companies whose income and assets are generally active in nature.

"None of these consequences would apply to Americans resident in Canada who purchase the securities of the active companies underlying the funds," De Laurentiis noted. "This creates an uneven playing field between products, and is in direct contradiction to the position of the Organisation for Economic Co-operation and Development (OECD), which has adopted the position that an investment in a collective investment vehicle should not result in a different incidence of tax than if the securities were owned directly."

In its submission, IFIC noted that Canada is not an 'offshore tax haven' for Americans who reside here, and that the mutual fund products are similar on both sides of the border.

IFIC's submission (found at this link: has been forwarded to two Congressional committees: the Financial Services Working Group Committee on Ways & Means, and the International Tax Reform Working Group.

The Investment Funds Institute of Canada is the voice of Canada's investment funds industry. IFIC brings together 150 organizations, including fund managers and distributors and industry service organizations, to foster a strong, stable investment sector where investors can realize their financial goals. By connecting Canada's savers to Canada's economy, our industry contributes significantly to Canadian economic growth and job creation. The organization is proud to have served Canadian financial consumers for more than 50 years.

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For more information contact:
Sara Clodman
Senior Manager, Public Affairs
The Investment Funds Institute of Canada (IFIC)
Phone: 416-309-2317

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The Investment Funds Institute of Canada (IFIC)


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