CFC Expat Tax – Important Facts You Need To Know

CFC Tax And The Anti-Deferral Regime

When taxpayers hear the term CFC Tax, it’s a reference to Subpart F. CFC tax or Subpart F is applicable to Controlled Foreign Corporations (CFCs) and their shareholders. It is the main anti-deferral regime applicable to US shareholders (owners) of a foreign corporation.

What Is A CFC – Controlled Foreign Corporation?

A CFC is defined by the US tax code as a foreign corporation in which US persons own – either directly, indirectly or constructively – more than 50 percent of the foreign corporation’s stock (but taking into account only US persons that own at least 10 percent of the stock).

What Is A CFC Tax?

Under CFC tax (Subpart F), the US can tax currently (vs. when actually distributed) the 10-percent US shareholders of the CFC on their proportion of specified income of the controlled foreign corporation (this is known as Subpart F income) irrespective of whether the income was retained by the corporation or distributed to shareholders.

CFC tax or Subpart F income generally includes passive income and other income that can be moved to manipulate inconsistencies between foreign and US tax systems – click on the link to learn more about the types of Subpart F income .

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If you are a shareholder of a CFC and would like to request a quote today to get started with the preparation of your CFC taxreporting on Form 5471 and/or a free 30-minute consultation to discuss your situation further.

Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.

When looking for a tax professional, choose carefully.  We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts). If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).

Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.

Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.