ICC Statement on Controlled Foreign Corporations (CFC) Rules
Prepared by the Task Force on CFC legislation
Publication date : 17/09/2003 | Document Number : 180-52
The objective of this policy statement is to draw the attention of domestic and international tax policy makers to the problems created for enterprises engaged in cross-border activities by the application of a variety of country specific Controlled Foreign Corporations Rules (CFC rules).
Globalisation has led to a tremendous increase in foreign direct investment worldwide in the last two decades. Many countries have removed or reduced barriers to the free flow of capital and investment. The number of companies having foreign entities has grown considerably and amounts to over 65,000 transnational corporations which themselves have more than 850,000 affiliates abroad. These developments have improved the functioning of the economies in all countries and have enhanced the possibilities for improving welfare and the economic conditions for the broader public.
However, in parallel with this development, we have also witnessed the proliferation of rules directed against tax avoidance and evasion: general anti-abuse clauses in domestic law, anti-avoidance rules in bilateral tax treaties, or specific domestic rules designed to counteract transactions considered as abusive, such as CFC rules. The US introduced CFC as subpart F rules in 1962, and in particular in the last decade, an important number of other countries followed and created their own CFC rules.