American Citizens investing in Israeli Mutual Funds face the issue of PFICs (Passive Foreign Investment Company). When categorized as such they face extremely onerous tax treatment: taxation on unrealized gains or taxation on gains which can exceed 50%.
Additionally, the IRS requires extensive reporting of PFIC holdings including details of every fund and every transaction including regular monthly investment and dividend distributions. Preparation of these documents has been estimated by the IRS at 40 hours…meaning high fees paid to your accountant. With the introduction of FBAR and FACTA the IRS is placing greater scrutiny on PFICS.
Until recently, the recommendation for investors trying to stay away from the negative US tax of Passive Foreign Investment Companies (PFICs) was to invest in Exchange Traded Notes (Teudot Sal). This has changed, however, and starting in mid-2018, Teudot Sal will need to be reported as PFICs.
There is much confusion and misconception regarding this area. US citizens are allowed to invest in Israel and throughout the world. And that can be done within your existing account at an Israeli bank or brokerage firm creating a “PFIC” free portfolio that can achieve your long term investment goals.. the area of our expertise.
We offer a free initial consultation to review you existing portfolio for PFIC exposure and recommend strategies to eliminate them.
We will redesign your portfolio as needed, eliminating any PFICs exposure.
Our systems are connected to all the major local Israeli banks so there is no need to change banks if the portfolio is located in an Israeli bank. We can also assist you in establishing new accounts at banks and brokerage firms.
We have extensive knowledge of both the local Israeli and global markets necessary to create portfolios designed for US/Israeli dual citizens.
We are fully licensed portfolio managers and our clients benefit from the protection of the Israel Securities Authority.
Lawrence Weinman MA, MBA has over 25 years' experience in the financial markets working with both institutional and individual investors in both Israel and the US. He is Director of Research at Commstock Trading.
Choosing the correct investments to minimize fees and taxes
Avoiding the high US taxes on Israeli mutual funds
Deciding where to locate your investment account: US or Israeli account?
Allocating your investments as a US/Israel dual citizen
Benefiting from the 10 year Israeli tax exemption on investment income