Study On The Controlled Foreign Corporation Legislation

One of the most important methods of tax planning for multinational corporations is the establishment of Controlled Foreign Corporations (hereafter referred to as "CFC") in tax heavens to defer domestic taxation. Accordingly, in order to combat international tax avoidance, many countries have enacted the CFC legislation, which is an important anti-tax avoidance mechanism. China has also absorbed the CFC rules in the newly enacted enterprise income tax law, but the CFC rules are still fundamental, and lack of practicability. By employing the approaches of integrative comparison, norms analysis and inductive analysis, the article compares and analyses the CFC legislations enacted in some countries, discusses the relationship between the international tax conventions and the CFC legislations, which represent the domestic anti-tax avoidance rules. Finally, based on the experience of the related countries, the article puts forward the approaches to improve the newly-enacted CFC rules, considers and renders suggestions on how to deal with the relationship between the domestic anti-tax avoidance rules and double taxation conventions to which China has contracted.The article consists of four chapters set below:Chapter 1 gives a brief introduction to the legal and economic background of CFC legislation.Chapter 2 focuses on a comprehensive comparison and analysis of CFC legislations of certain countries, from the perspectives of five key issues, which are the definition of " control" , applicable territories, attributed income, exemption and the approach of avoidance of double taxation.Chapter 3 discusses the relationship between the international tax conventions and the CFC legislations which represent the domestic anti-tax avoidance rules, clarifies the main argument of the theory of conflict and coordination and explains the new position in the OECD Model Commentary, which can be regarded as being in the form of international taxation customary law. Chapter 4 according to the specific national conditions and tax policies of China, puts forward the proposals on the application and perfecting of the present CFC legislation of China. Furthermore, China's CFC rules should pay attention to follow the requirements of comparability principle, and that of the real business activities principle to ensure the compatibility between domestic anti-tax avoidance rules and double taxation conventions.