Controlled Foreign Corporation (CFC) Rules
Controlled foreign corporation (CFC) rules are designed to limit artificial deferral of tax by using low taxed entities. Almost all countries have comprehensive CFC rules, for instance the United States, the United Kingdom, Germany, Japan, Australia, New Zealand, Brazil, Sweden, South Africa, and Russia.

CFC rules vary from country to country, however, it is common in most CFC rules that:

1

Shareholders of foreign companies may have to tax the entire foreign company as domestic and hence all CFC income becomes local income

2

The reportable income generally includes income received by the controlled foreign corporation (CFC), like income from passive sources, including interest, dividends and royalties from unrelated parties; from purchasing and selling goods to related parties; or from non-operating, insubstantial, or passive businesses.


3

CFC rules may have a certain threshold for shareholding.


At Mühler McKay, we have been dealing with different jurisdictions, providing solutions and advisory services in regards to business structuring in a tax compliant way. Feel free to contact us to have your situation accessed.