Controlled Foreign Corporation

A Controlled Foreign Corporation (CFC) is a foreign company in which a domestic (home country) parent company owns a significant share, typically more than 50%. Tax laws often view CFCs as extensions of the parent company, meaning profits earned abroad can be taxed in the home country, even if not physically repatriated. This rule aims to prevent businesses from shifting profits to lower-tax jurisdictions to avoid paying full domestic taxes. Essentially, a CFC is a foreign subsidiary closely controlled by the parent company, and recognizing it helps ensure proper taxation of international income.