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TMI BlogAction Plan 3 – Strengthen Controlled Foreign Company (CFC) RulesX X X X Extracts X X X X X X X X Extracts X X X X ..... e cases, other countries by shifting income into a CFC. Without such rules, CFCs provide opportunities for profit shifting and long-term deferral of taxation. CFC are corporate entities incorporated in Tax Haven countries & controlled directly or indirectly by resident of higher tax jurisdiction. Ton curb these practices many countries come out with CFC regulations. As per CFC rules Income earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictions that choose to implement them will have rules that effectively prevent taxpayers from shifting income into foreign subsidiaries. The report sets out the following six building blocks for the design of effective CFC rules: * Definition of a CFC - CFC rules generally apply to foreign companies that are controlled by shareholders in the parent jurisdiction. The report sets out recomme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parent jurisdiction, many CFC rules only apply to certain types of income. The report recommends that CFC rules include a definition of CFC income, and it sets out a non-exhaustive list of approaches or combination of approaches that CFC rules could use for such a definition. * Computation of income - The report recommends that CFC rules use the rules of the parent jurisdiction to compute the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules allow a credit for foreign taxes actually paid, including any tax assessed on intermediate parent companies under a CFC regime. It also recommends that countries consider relief from double taxation on dividends on, and gains arising from the disposal of, CFC shares where the income of the CFC has previously been subject to taxation under a CFC regime. Because each country prioritises poli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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