In order to combat tax evasion, the United States has put in place many rules. Today we discuss the ones directed at US citizens investing outside the U.S. These are traps for many US citizens living in Canada, simply doing the sort of things that many Canadians normally do. While it is true that Canada is not a tax haven, these rules are often of general application. And the Canada-United States Tax Treaty supposedly should grant tax relief. But the truth is it does not provide much relief due to the overreaching application of the “savings clause”. It specifies that most of the tax treaty is not applicable to US citizens. 1. What does a U.S. citizen in Canada need to know about Passive Foreign Investment Companies (PFIC)? The rules in question may apply to income or profits derived by a U.S. taxpayer who owns shares in a passive foreign investment company (PFIC). The PFICs are non-U.S. corporations that derive at least 75% of their gross revenue from passive sources or at least 50% of which is used to generate passive income.