Metaplanet Inc. is reviewing whether it may be categorized as a passive foreign investment company (PFIC) under U.S. tax law for the 2025 tax year, a classification that could impact the tax obligations of its American shareholders.
The Tokyo-based investment firm disclosed the potential classification in a statement from CEO Simon Gerovich, noting it is in consultation with tax advisors to assess its status and guide U.S. investors accordingly.
The PFIC designation is based on specific thresholds related to passive income and passive assets. If 75% or more of a company’s income is considered passive, or if 50% or more of its assets produce or are held for producing passive income, the company may qualify as a PFIC under Internal Revenue Service (IRS) rules.
Active Income Expected to Dominate, But Uncertainty Remains
Gerovich stated that Metaplanet expects most of its income for 2025 to qualify as active under IRS definitions, primarily due to earnings from options trading in its Bitcoin Income Generation business line and revenues from its hotel operations.
He also noted that a substantial portion of the company’s assets, including goodwill implied by its market capitalization, may be classified as active rather than passive. Despite this expectation, Metaplanet acknowledged the complexity and ambiguity of PFIC rules, emphasizing that the IRS could reach a different conclusion.
Guidance on Shareholder Elections Forthcoming
To mitigate potential tax consequences, the company is evaluating whether it can provide shareholders with the information needed to make a “qualified electing fund” (QEF) election. This election allows U.S. investors to report their share of a PFIC’s income annually rather than face punitive tax treatment on distributions or sales of shares.
If a QEF election is made, shareholders would typically include their portion of Metaplanet’s annual earnings in their taxable income. These earnings would not include unrealized gains on the company’s Bitcoin holdings.
Metaplanet has committed to issuing further guidance in the near term. U.S. shareholders were urged to consult individual tax advisors to understand the implications of a potential PFIC classification.
