IDEAS home Printed from https://ideas.repec.org/a/cpn/umkeip/v8y2012i1p171-188.html
   My bibliography  Save this article

Introduction to the problems of taxation of “controlled foreign companies”

Author

Listed:
  • Blazej Kuzniacki

    (Nicolaus Copernicus University)

Abstract

This article deals with the problems of taxation of controlled foreign companies (hereinafter: CFC) in the light of the contemporary process of economic integration, international tax law and the European Union law. In general, the Controlled Foreign Companies rules (hereinafter: CFC rules) can be defined as specific anti-tax avoidance measures that grant the right of the shareholders’ country to attribute certain income generated by CFC to its shareholders and subsequently levy tax on it. The CFC rules may be applied either by regarding the company as a transparent entity (disregarded legal entity/piercing the veil approach), or deeming a distribution of the undistributed profits generated by the foreign company to the shareholder (deemed dividend approach). It should be noted that without the CFC rules, taxation – in the shareholders’ country – of income generated or received by a CFC is deferred until the distribution of profits by the CFC to its shareholders. Furthermore, if the CFC is established in a jurisdiction that does not impose taxes or imposes taxes at the very low rates, for instance a tax haven, or in a state or territory with a lenient tax regime, and the dividends are never distributed to the shareholders, the income is not subject to tax eventually. Thus, in nutshell, a common feature of the CFC rules is not to lose tax revenue in high tax countries by curbing the abuse of companies established on an international level for the sole purpose of avoiding taxation.

Suggested Citation

  • Blazej Kuzniacki, 2012. "Introduction to the problems of taxation of “controlled foreign companies”," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 8(1), pages 171-188, March.
  • Handle: RePEc:cpn:umkeip:v:8:y:2012:i:1:p:171-188
    DOI: 10.12775/EiP.2012.011
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.12775/EiP.2012.011
    Download Restriction: no

    File URL: https://libkey.io/10.12775/EiP.2012.011?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    taxation; controlled foreign companies;

    JEL classification:

    • A - General Economics and Teaching

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpn:umkeip:v:8:y:2012:i:1:p:171-188. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Miroslawa Buczynska (email available below). General contact details of provider: http://www.wydawnictwoumk.pl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.