also called CFC · CFC rules
Rules that tax a resident on the profits of a foreign company they control, even if those profits aren't paid out.
These are rules that tax you personally on the profits of a foreign company you control, even if the company keeps the money and never pays it out to you. They exist to stop people parking income in an offshore company to defer tax. That is a different concept from permanent establishment, which is about a company creating a taxable presence in a country through its activities there; CFC rules reach through the company to the owner.
Someone sets up an offshore company expecting to leave profits inside it untaxed until they choose to draw them. Their home country's rules attribute the company's income straight to them anyway, so they owe tax now on money still sitting in the company account, and the deferral they planned for never materialises.
Setting up an offshore company doesn't defer tax if your home country's CFC rules attribute its income straight to you.
The difference is the whole point, so here is each one in a line.
These are the rules that reach through a company to tax an owner or create a tax bill abroad.
Controlled Foreign Corporation rules tax a resident on a foreign company's profits even if it never pays them out, and GILTI is the US version aimed at low-taxed foreign profits.
A PFIC is a US classification that punishes Americans holding many foreign funds, and permanent establishment is when a company's activity in a country is enough to be taxed there.
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