What qualifies as a controlled foreign corporation?

In the U.S., a CFC is a foreign corporation in which U.S. shareholders own more than 50% of the total combined voting power of all voting stock or the total value of the company’s stock.

Do CFC rules apply to individuals?

If you have an interest in a CFC, you must determine if you are an attributable taxpayer. You are only required to include an amount of attributable income from a CFC in your assessable income if you are an attributable taxpayer in relation to the CFC.

What is the purpose of CFC rules?

CFC rules prevent the artificial diversion of profits from controlling companies to CFCs (offshore entities in low-tax or no-tax jurisdictions). The rules operate by attributing undistributed income of a CFC to the controlling company or a connected company in the State.

How is CFC income taxed?

U.S. shareholders of controlled foreign corporations (CFCs) are subjected to current taxation on most income earned through a CFC in excess of a 10% return on certain of the CFC’s tangible assets – with a reduction for certain interest expense.

Does Canada have CFC rules?

Canada currently has a robust set of CFC rules. The “foreign accrual property income” or “FAPI” rules are a broad set of anti-deferral rules applicable to passive income earned by a “controlled foreign affiliate” of a Canadian taxpayer.

Is a foreign subsidiary a CFC?

In general, a foreign corporation is considered a CFC if more than 50% of the voting power or value is held by U.S. shareholders. According to the IRS, a U.S. shareholder is any U.S person (who can be corporations or other certain entities) who owns at least 10% of the voting power of that foreign corporation.

What is a CFC Holding Company?

CFC Holding Company means a Domestic Subsidiary of the Borrower that owns no material assets (directly or through one or more disregarded entities) other than the equity (including any debt instrument treated as equity for U.S. federal income tax purposes) of one or more Foreign Subsidiaries that are CFCs.

Is a foreign LLC a CFC?

In general, a foreign corporation is a CFC if more than 50 percent of its voting power or value is owned by U.S. Shareholders. A U.S. Shareholder of a foreign corporation is a U.S. person who owns 10 percent or more of the total voting power of that foreign corporation.