Controlled Foreign Corporation (CFC) rules are regulations implemented by countries to prevent tax avoidance by corporations that shift income to foreign subsidiaries in low-tax jurisdictions. These rules typically require the parent company to include the income of its foreign subsidiaries in its taxable income, thereby reducing the incentive to shift profits abroad.
Relevant Degrees
Concept
Tax avoidance is the legal practice of structuring financial affairs to minimize tax liability within the bounds of the law. It involves using tax deductions, credits, and loopholes to reduce the amount of tax owed, distinguishing it from tax evasion, which is illegal.
Concept
Tax jurisdiction refers to the authority granted to a government to impose and collect taxes within a defined geographical area or over certain types of entities or transactions. It is crucial in determining which government has the right to tax a particular activity, income, or entity, impacting both domestic and international tax planning and compliance.
Concept
A parent company is a corporation that owns enough voting stock in another company to control its management and operations, often through the election of its board of directors. This ownership structure allows the parent company to influence or dictate the business strategies and decisions of its subsidiaries, while still maintaining them as separate legal entities.
Concept
A subsidiary is a company that is controlled or owned by another company, known as the parent company. This relationship allows the parent company to diversify its operations and manage risks by having separate legal entities under its control.
Concept
Income shifting is a strategic financial practice where income is transferred from a high tax bracket entity to a lower tax bracket entity to reduce overall tax liability. This technique is commonly used by businesses and individuals to optimize tax efficiency and maximize after-tax income through careful planning and legal structuring.
Concept
Taxable income is the portion of an individual's or a company's income that is subject to taxation according to tax laws. It is calculated by subtracting allowable deductions and exemptions from gross income, thereby determining the amount on which tax liability is assessed.
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International taxation refers to the set of rules and principles that govern the tax obligations of individuals and businesses operating across different countries, aiming to prevent tax evasion and double taxation. It involves complex interactions between various national tax systems and international agreements, requiring careful navigation to ensure compliance and optimize tax liabilities.
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Transfer pricing refers to the rules and methods for pricing transactions between enterprises under common ownership or control, ensuring that transactions are conducted at arm's length to prevent profit shifting and tax avoidance. It is a critical aspect of international taxation and compliance, influencing the allocation of income and expenses among different jurisdictions.
Base Erosion and Profit Shifting (BEPS) refers to the strategies employed by multinational companies to shift profits from high-tax jurisdictions to low-tax jurisdictions, thereby eroding the tax base of the high-tax countries. The OECD has developed a comprehensive action plan to address BEPS, aiming to ensure that profits are taxed where economic activities generating the profits are performed and where value is created.
Concept
Cross-border taxation involves the imposition of taxes by multiple jurisdictions on income or transactions that span international boundaries, often leading to complexities such as double taxation. It requires careful navigation of international tax treaties, transfer pricing regulations, and compliance with the differing tax laws of each involved country.
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International tax law governs the taxation of cross-border transactions and activities, aiming to prevent tax evasion and double taxation while promoting economic cooperation among countries. It involves a complex interplay of domestic laws, bilateral treaties, and multilateral agreements, requiring countries to balance their fiscal sovereignty with global economic integration.
Concept
Anti-avoidance rules are legal provisions designed to prevent individuals and corporations from exploiting loopholes in tax laws to minimize their tax liabilities. These rules ensure that tax obligations are met in accordance with the spirit of the law, rather than just the letter, thereby maintaining fairness and integrity in the tax system.
Concept
International tax policy refers to the regulations and agreements that govern how taxes are applied to cross-border economic activities, aiming to prevent tax evasion and ensure fair taxation of global businesses. It involves the coordination between countries to address issues like double taxation, tax avoidance, and the allocation of taxing rights among jurisdictions.
Concept
Profit shifting is a strategy used by multinational corporations to reduce their tax liabilities by moving profits from high-tax jurisdictions to low-tax jurisdictions. This practice exploits differences in tax rates and regulations across countries, often leading to significant tax base erosion in higher-tax countries.
Concept
Double non-taxation occurs when income or capital is not taxed in either the source country or the residence country, leading to potential gaps in the global tax system. This situation often arises from mismatches in tax laws between jurisdictions, allowing taxpayers to exploit these differences to minimize or entirely avoid tax liabilities.
Concept
Anti-avoidance measures are legal provisions designed to prevent individuals and corporations from exploiting loopholes in tax laws to reduce their tax liabilities. These measures ensure that tax systems are fair and that everyone pays their fair share, thereby maintaining the integrity of the tax system.
Concept
Anti-deferral regimes are tax systems designed to prevent taxpayers from deferring tax liabilities by shifting income to foreign subsidiaries or low-tax jurisdictions. These regimes aim to ensure that income is taxed in the country where it is earned, thereby limiting tax avoidance strategies that exploit differences in tax rates across borders.
Taxation of international income involves the rules and regulations that determine how income earned by individuals or entities across borders is taxed by their home country and the country where the income was earned. It aims to prevent double taxation while ensuring that income is taxed fairly and efficiently, taking into account tax treaties, residency status, and the source of income.
Concept
International Tax Compliance refers to the adherence to tax laws and regulations across different jurisdictions, ensuring that individuals and corporations accurately report income and pay taxes in accordance with the laws of each country where they operate. It involves navigating complex tax treaties, understanding local tax obligations, and implementing strategies to minimize tax liabilities while remaining compliant.
Concept
An Anti-Deferral Regime is a set of tax rules designed to prevent taxpayers from deferring tax on foreign income by keeping it offshore. It ensures that income earned abroad is taxed in the taxpayer's home country, either immediately or upon repatriation, to discourage tax avoidance strategies.
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