Limitations on syndicate investments in certain foreign companies (PFIC & CFC)

Investments in certain types of foreign companies are subject to disadvantaged tax treatment and ongoing compliance requirements.

These rules are complicated, but if the investment is in a foreign holding company it may be a Passive Foreign Investment Company (PFIC) and if the investment is in a foreign company that is majority-owned by US taxpayers, it may be a Controlled Foreign Corporation (CFC).

As a result of the added tax and compliance burdens, AngelList does not generally facilitate investment in either PFICs or CFCs. When a syndicate makes an investment in a non-US company, the company will be asked to certify that it is neither a PFIC nor a CFC and agree to ongoing compliance requirements.

A lead should confirm the PFIC / CFC status with a foreign company early on to avoid wasted efforts. Any investment in a company that cannot certify to being a non-PFIC / CFC will either not be facilitated on AngelList or will require additional disclosures and approvals from AngelList.

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