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Profit-Seeking Enterprise Controlled Foreign Company (CFC) Rules



Profit-Seeking Enterprise Controlled Foreign Company (CFC) Rules

Legislative Purpose
Prevent any enterprise from establishing a CFC in a low-tax jurisdiction to retain earnings in the CFC for tax avoidance

Exemption Threshold
1. The CFC carries out substantial operating activities
2. The current-year earnings of the CFC are no more than NTD 7 million

Avoidance of Double Taxation
1. When actually receiving dividends or earnings, the amount shall not be included in taxable income again
2. Foreign tax credits may be applicable
3. When an enterprise disposes of CFC shares and calculates capital gains, the CFC’s investment income recognized previously can be deducted based on the disposal ratio of the shares

CFC Definition
For any profit-seeking enterprise and its related parties directly or indirectly holding 50% or more of shares or capital of a foreign enterprise registered in a low-tax jurisdiction, or having a significant influence on such a foreign enterprise

Taxation Investment Income
CFC investment income recognized by profit-seeking enterprises
= (The current-year earnings of the CFC – The legal reserve or restricted distributable earnings –The losses of past years assessed by tax authority)
x Direct holding ratio
x Holding period

Enforcement Date
Shall be enforced from taxable year 2023

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Last updated:2022-12-20