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Controlled foreign corporation
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==United Kingdom rules== Controlled foreign company rules in the UK do not apply to individual shareholders, but otherwise they are similar to the U.S. rules.<ref>[[Income and Corporation Taxes Act 1988]], as amended (hereafter ICTA88), section 747 ''et seq''. See [[HM Revenue and Customs|HMRC]]'s International Manual at [http://www.hmrc.gov.uk/manuals/intmanual/INTM200000.htm INTM20000].</ref> UK resident companies are subject to a charge for tax on undistributed income of low tax controlled foreign companies of which they are shareholders. Control for this purpose is not a mechanical test, rather one of factual control. However, control is considered to exist if the shareholder (or shareholder group of companies) owns 40% or more of voting interests.<ref>"The test is not a mechanical one based simply on, for example, shareholding or voting rights. The aim is to establish whether a person (or persons) has the power to ensure that the affairs of a company are conducted in accordance with his (or their) wishes." [http://www.hmrc.gov.uk/manuals/intmanual/INTM202020.htm INTM202020] {{webarchive|url=https://web.archive.org/web/20090717001251/http://www.hmrc.gov.uk/manuals/intmanual/INTM202020.htm |date=2009-07-17 }}.</ref> A controlled company is a controlled foreign company if it is tax resident outside the UK and it is subject to a charge to tax less than it would have been were it a UK resident company. This is determined by comparing the actual charge to tax to a corresponding UK tax. In computing the corresponding tax, lower UK rates of tax on small companies are considered. Further, there are taken into account certain adjustments to income and fiscal years. Certain exemptions apply.<ref>ICTA88/S748(a).</ref> Generally, a foreign company will not be considered a controlled foreign company if it meets any of the following tests: *It is tax resident in a "white list" of countries not considered to be tax havens, as maintained by HMRC.<ref>https://www.legislation.gov.uk/uksi/2012/3024/made</ref> The list of exempt jurisdictions has 103 states and territories, including 20 of the 27 EU Member States. The 7 EU countries not on the list are Bulgaria, Cyprus, Estonia, Hungary, Ireland, Latvia and Lithuania. Countries on the exempt list include Panama and Belize, which are on the EU's list of non-cooperative tax jurisdictions.<ref>https://kpmg.com/us/en/taxnewsflash/news/2024/10/tnf-eu-updated-list-non-cooperative-tax-jurisdictions.html</ref> *The foreign company maintains a policy whereby it distributed 90% or more of its available earnings each year (no longer applicable since 1 July 2009), *The company qualifies for a De Minimis level of accounting profits being less than Ā£200,000. This level of income has been in place since 1 January 2011. Previously the level was set at Ā£50,000 of profits that would be chargeable to UK corporation tax if the company were UK resident (not necessarily the same as accounting profits). *The foreign company meets an active business test, *The foreign company is publicly quoted on a recognized securities exchange, or *The group meets a no-tax-reduction motive test. *The CFCās profits are taxable in the jurisdiction of its tax residency at a rate not less than 75 per cent of UK corporation tax. For example, if the current corporation tax rate in the UK is 19%, the CFC's profits must be taxed at a rate not less than 14.25% in its jurisdiction in order to be exempt from taxation in the UK.<ref>https://www.uniwide.com/articles/cfc-rules-in-the-uk/</ref>
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