If you're a US citizen or green card holder living in Switzerland and you own a Swiss mutual fund, an investment-linked insurance policy, or shares in a pooled investment vehicle outside the US, there's a good chance you're looking at Form 8621. This is the form the IRS uses to track ownership of what's called a passive foreign investment company, or PFIC — a category that catches nearly every non-US pooled fund, whether or not it feels like an 'investment' in the way you'd expect. This guide walks through what the form actually asks for, when you're required to file it, how the tax calculation works, and what happens if it gets missed. None of this is individual tax advice — it's the landscape, so you understand what you're dealing with before you talk to someone about your specific accounts.
What Is a PFIC, in Plain English?
A PFIC is any foreign corporation that meets one of two tests: the income test (75% or more of its gross income is passive — think dividends, interest, capital gains) or the asset test (50% or more of its assets produce, or are held to produce, passive income). Almost every Swiss mutual fund, ETF, and many investment-linked life insurance products fall into this category, because from the IRS's perspective they look like pooled investment vehicles generating passive income, regardless of how they're regulated or sold in Switzerland. If you want the fuller picture of why these products get caught, Swiss Mutual Funds, ETFs and the PFIC Tax Trap: What US Expats Must Know breaks down exactly which product types tend to qualify.
Form 8621 is titled 'Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.' It's not a tax calculation by itself — it's the reporting mechanism that tells the IRS which PFICs you own, how you're electing to treat them for tax purposes, and (depending on your situation) what income or gain results. The form was revised again for the December 2025 version, which applies to the 2025 tax year filed in 2026. That revision updated Part V to require a three-letter currency code for foreign-currency amounts and added a new line, 15e(2), specifically for converting those amounts into US dollars — a small but useful clarification for anyone reporting in Swiss francs.
The Five Triggers That Require Filing Form 8621
According to the IRS instructions for Form 8621, there are five distinct circumstances that require a US person to file. You only need one of these to apply for the filing obligation to kick in:
- You receive a direct or indirect 'excess distribution' from a PFIC (an unusually large distribution compared with prior years, taxed under the default punitive method).
- You recognize a gain on the disposition of PFIC stock — selling, exchanging, or otherwise disposing of shares.
- You are making an election for the PFIC, such as a Qualified Electing Fund (QEF) election or a mark-to-market election.
- You are making certain other elections, such as those related to previously taxed amounts or purging elections.
- You meet the annual reporting requirement under Section 1298(f), which applies once the value of your PFIC holdings crosses specific thresholds.
That fifth trigger is the one that catches most Americans in Switzerland who aren't actively trading — simply holding PFIC shares above the reporting threshold requires a filing, even if you never sold anything and received no distribution. Under the widely cited PFIC reporting threshold, the requirement generally applies once your PFIC holdings exceed $25,000 for single filers or $50,000 for those filing jointly, though the exact aggregation rules and exceptions depend on your filing status and other foreign asset reporting. This is one of those areas where the general rule is easy to state but the details genuinely depend on your situation — get personal advice before assuming you're under or over a threshold.
One Form Per Fund — Even With No Income
A detail that surprises a lot of people: you don't file one Form 8621 covering all your foreign investments. You file a separate Form 8621 for each individual PFIC you hold. If you have three Swiss mutual funds and a fourth pooled investment inside an insurance wrapper, that's potentially four separate forms — sometimes more if a fund holds other underlying funds, since chain ownership and indirect ownership rules mean you may need to look through to underlying PFICs held by a fund you own. This is why a seemingly simple diversified Swiss portfolio can quietly generate a stack of paperwork. It also means the filing obligation applies even in years where the fund distributed nothing and you sold nothing — as long as you owned the shares and crossed the reporting threshold, a form is due for that specific holding.
How PFIC Income Gets Taxed: Three Methods
This is where Form 8621 stops being just a disclosure form and starts affecting your actual tax bill. There are three ways a PFIC can be taxed, and which one applies depends on elections you make (or fail to make) on the form.
1. Section 1291 — The Default (and Least Favorable) Method
If you don't make any election, the default treatment under Section 1291 applies automatically. This is generally considered the least favorable option. Under this method, 'excess distributions' and gains on sale are spread ratably over your entire holding period, taxed at the highest ordinary income rate for each prior year, and hit with an interest charge for the deemed deferral of tax in those earlier years — essentially treating you as if you owed tax all along and just paid it late, with interest attached. It's punitive by design, but it's fixable: once you understand which of your holdings default to this treatment, there are usually options to consider going forward, even if the option to elect out retroactively for prior years is limited.
2. Mark-to-Market (MTM) Election
If the PFIC stock is 'marketable' — meaning it's regularly traded on a qualified exchange — you may be able to elect mark-to-market treatment. Under MTM, you report the increase in the fund's value each year as ordinary income, whether or not you sold anything or received a distribution. Losses are deductible only to the extent of prior MTM gains you've included. This avoids the interest charge and the lookback calculation of Section 1291, trading it instead for annual taxation on unrealized gains — a different trade-off, not necessarily a better or worse one in every case, but often simpler to administer.
3. Qualified Electing Fund (QEF) Election
A QEF election is often considered the most tax-efficient option where it's available, but it has a practical catch: the fund itself must provide you with a PFIC Annual Information Statement each year, breaking out your share of the fund's ordinary earnings and net capital gain. Most Swiss and European mutual funds are not set up to produce this statement, because it's a US-specific requirement that doesn't serve their broader investor base. Without that statement, a QEF election generally isn't practically available, which is part of why so many Americans in Switzerland end up defaulting to Section 1291 treatment on funds they didn't realize were PFICs in the first place.
Elections Are Fund-by-Fund and Timing-Sensitive
An election you make for one PFIC doesn't automatically apply to others you hold, and the year in which you first make an election can affect how prior unrealized gains are treated. This is squarely a 'get personal advice' area — the right approach depends on your specific holdings, your holding period, and your broader financial picture.
Where PFICs Show Up Beyond 'Obvious' Investment Accounts
PFIC exposure isn't limited to a brokerage account holding Swiss ETFs. It regularly shows up inside products that don't feel like investments at all. Certain Swiss insurance policies with an investment or savings component can wrap PFIC-classified funds inside the policy structure, meaning the reporting obligation follows through to you as the policyholder — a dynamic explored in more depth in The Hidden US Tax Traps in Swiss Insurance Policies for Americans. Pension structures raise a related but distinct question, since pillar 2 (the mandatory occupational pension) and pillar 3a (the voluntary private pension) each have their own treatment questions under the US-Switzerland framework, separate from standard PFIC analysis — that's covered in Swiss Pension Plans and US Taxes: Compliance Guide for American Expats.
What Happens If Form 8621 Isn't Filed
Missing a required Form 8621 carries real consequences, but it's a fixable situation, not a crisis. Penalties for non-filing can run $10,000 or more per form, and — importantly — the statute of limitations on your entire tax return can remain open until the missing form is filed, not just for the PFIC issue but potentially for the whole return. That last point is often the one that surprises people most: an unfiled Form 8621 can leave your return technically open indefinitely, well past the normal three-year window. If you've discovered you should have been filing and haven't been, the constructive path is to understand your specific facts — how many PFICs, how many years, what the underlying gains or distributions look like — and address it deliberately, rather than either ignoring it or panicking. There are established procedures for catching up on past filings, and which one fits depends entirely on your situation.
$10,000+
Potential penalty per unfiled Form 8621, per PFIC
$25k / $50k
Annual PFIC reporting threshold: single / married filing jointly
The Bottom Line
Form 8621 exists because the US taxes citizens on worldwide income regardless of where they live, and foreign pooled investments get special, less favorable treatment by default. For Americans in Switzerland, that means routine, sensible investment choices — a diversified Swiss fund, an investment-linked insurance product, sometimes even certain pension arrangements — can trigger reporting and tax obligations that aren't obvious until someone points them out. The five triggers, the per-fund filing requirement, and the choice between Section 1291, mark-to-market, and QEF treatment are all things you can understand at a conceptual level on your own. Mapping them correctly onto your actual accounts, and deciding which elections make sense for your specific holding period and portfolio, is where this genuinely depends on your situation — and where working with someone who understands both the US and Swiss sides of the picture tends to save both money and stress.