CFC Tax And The Anti-Deferral Regime
When taxpayers hear the term CFC Tax, it’s a reference to Subpart F. CFC tax or Subpart F is applicable to Controlled Foreign Corporations (CFCs) and their shareholders. It is the main anti-deferral regime applicable to US shareholders (owners) of a foreign corporation.
What Is A CFC – Controlled Foreign Corporation?
A CFC is defined by the US tax code as a foreign corporation in which US persons own – either directly, indirectly or constructively – more than 50 percent of the foreign corporation’s stock (but taking into account only US persons that own at least 10 percent of the stock).
What Is A CFC Tax?
Under CFC tax (Subpart F), the US can tax currently (vs. when actually distributed) the 10-percent US shareholders of the CFC on their proportion of specified income of the controlled foreign corporation (this is known as Subpart F income) irrespective of whether the income was retained by the corporation or distributed to shareholders.
CFC tax or Subpart F income generally includes passive income and other income that can be moved to manipulate inconsistencies between foreign and US tax systems – click on the link to learn more about the types of Subpart F income .
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If you are a shareholder of a CFC and would like to request a quote today to get started with the preparation of your CFC taxreporting on Form 5471 and/or a free 30-minute consultation to discuss your situation further.
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