How easy is it to benefit from CFC

[Revoltec]

How easy is it to benefit from the fact that your country does not have CFC rules? Is it as easy as just registering any company abroad and never take out capital from that company?

 

[daniels27]

Are you managing the company? Then the PE rules apply and you have to pay taxes at your home as you are managing a company locally.

But apart from that, I would say benefitting from the absence of CFC is fairly easy

 

[Revoltec]

Are you managing the company? Then the PE rules apply and you have to pay taxes at your home as you are managing a company locally.

But apart from that, I would say benefitting from the absence of CFC is fairly easy

I am not based in my home country, regardless still a tax resident. Would that make PE rules still relevant?
But I guess your point was that I shouldn't be controlling the company?

 

[daniels27]

Yes, the company is taxed at the place it is managed. You first need to ensure you have no issues with that. Once that is clear, you are fine if there are no CFC rules in any coutry you are tax resident.

I don't know the exact setup, it is hard to give any solid advice.

 

[Revoltec]

Okey cool. How can I learn more about CFC rules? It is hard for me to find any resources on this field

 

[Revoltec]

Also, if the country got a "substance over form" principle, is that something that could still be a problem, even if there are no CFC rules?

 

[daniels27]

Can you please elaborate on your case? What is your residency, business, etc.? I am happy to help, but would need some more information to give you a bit more accurate advice.

In short, CFC rules apply if you are living in a high tax country and are shifting (especially passive investment) to a low tax country by setting up an offshore company with a director there. They will then still tax you at home.

 

[JustAnotherNomad]

It really depends on the specific setup, where you actually work etc.

 

[diro]

How easy is it to benefit from the fact that your country does not have CFC rules? Is it as easy as just registering any company abroad and never take out capital from that company?

What country is that without CFC ?

If there isn't any reporting in your country you can just cheat as much as you like, it's like going back 15 - 20 years in time.

 

[daniels27]

What country is that without CFC ?

If there isn't any reporting in your country you can just cheat as much as you like, it's like going back 15 - 20 years in time.

There are many countries without CFC. Switzerland, Hong Kong, etc. Of course, there are still PE rules. But in the case of like Hong Kong with no tax on passive income, the CFC rules are not really making a lot of sense as most of them are built to trigger tax on shifted passive profits.