A passive foreign investment company (PFIC) is a corporation, located abroad, which exhibits either one of two conditions, based on either income or assets:

1. At least 75% of the corporation's gross income is "passive"—that is, derived from investments or other sources not related to regular business operations.
2. At least 50% of the company's assets are investments, which produce income in the form of earned interest, dividends, or capital gains.