CFC Rules (Controlled Foreign Corporation)

Controlled Foreign Corporation (CFC) rules are tax regulations that target U.S. taxpayers who own foreign corporations. If U.S. residents have significant ownership in a foreign company (usually more than 50%), they must report the company’s income on their U.S. tax returns. This prevents taxpayers from avoiding U.S. taxes by shifting profits to low-tax countries. The CFC rules aim to ensure that U.S. taxpayers pay taxes on foreign earnings, maintaining fairness in the tax system and discouraging profit shifting to jurisdictions with lower tax rates.