Controlled Foreign Corporation (CFC) Rules

Controlled Foreign Corporation (CFC) rules are taxation regulations that apply to companies based outside a country but controlled by residents of that country. These rules aim to prevent tax avoidance by ensuring that income earned by foreign subsidiaries is taxed appropriately. If a domestic taxpayer has significant ownership in a foreign company, CFC rules may require them to report and pay taxes on certain types of income earned by that foreign company, even if those earnings aren't distributed to shareholders. This helps maintain fair tax practices and prevents profit shifting to low-tax jurisdictions.