Individual Controlled Foreign Company (CFC) Rules

Legislative Purposes
Prevent any individual from establishing a CFC in the low-tax jurisdiction and retaining earnings in CFC  for tax avoidance

Exemption Threshold
(1) The CFC caries out substantial operating activities
(2) The current year earnings of the CFC less than NTD 7 million

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

Taxation Requirements
To meet both requirements below
1. For any individual and his/her 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
2. For any individual with his or her spouse and relatives within the second degree of kinship holding 10% or more of shares or capital of a CFC

Taxation Investment Income
CFC business income of individuals
= (The current year surplus earnings of the CFC –The losses of past years assessed by tax authority)
* Direct holding ratio
* Holding period

Enforcement Date
Will be determined by the Executive Yuan

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