Controlled Foreign Company Rules are anti-deferral tax rules that attribute the passive or low-taxed income of a foreign subsidiary to its domestic parent, even without distribution.
Controlled Foreign Company (CFC) rules are anti-avoidance provisions that prevent multinational groups from parking passive or highly mobile income in low-tax foreign subsidiaries.
If the foreign entity is controlled (typically more than 50% by the domestic parent or related parties) and meets a low-tax test, certain categories of its income are attributed to the parent and taxed currently, regardless of whether profits are distributed.
The US adds the Global Intangible Low-Taxed Income (GILTI) regime on top of Subpart F. The EU Anti-Tax Avoidance Directive (ATAD) imposes a minimum CFC standard. The UK has its own gateway-based CFC rules, and India runs the Place of Effective Management test plus specific anti-avoidance provisions.
CFC rules can completely undo the cash-tax benefits of a foreign holding or IP company.
You will encounter CFC rules whenever you consider an offshore IP-holding entity, a captive insurer, an intra-group financing company, or any subsidiary in a low-tax jurisdiction. They also surface during M&A diligence, where the buyer scrutinises whether prior structures created CFC inclusions.
See what a company actually costs in year one, and how the jurisdictions compare on tax, capital and timeline.
