CFC Rules (Controlled Foreign Corporation Rules)

Controlled Foreign Corporation (CFC) rules are tax regulations that aim to prevent U.S. taxpayers from avoiding domestic taxes by shifting profits to foreign subsidiaries. If a U.S. shareholder controls a foreign corporation, certain income types from that corporation may be taxed in the U.S., even if not distributed as dividends. This ensures that U.S. taxpayers pay taxes on income earned abroad, promoting fairness and reducing tax avoidance. CFC rules are important for maintaining the integrity of the tax system and ensuring that income is taxed appropriately, regardless of where it is generated.