Controlled foreign corporation rules – Part 2

Example

Where a resident(s) of Country A is able to influence or control an entity that is resident(s) of Country B, including the profit distribution or repatriation policies of such controlled company, the income of such company may not be distributed and brought into Country A and remain outside the scope of its taxation. CFC rules are framed to enable Country A to tax its residents on the undistributed income of the company that they control, but which are located in Country B.

If a business headquartered in Country A (with a combined corporate income tax rate of 32.02 percent) has a subsidiary in the Country B (which does not tax corporate income), Country A in certain cases may assert the right to tax the income earned by the Country B subsidiary.

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