Control
Economic control often determines the tax risk profile.
CFC Rules
Foreign companies must be explainable for tax purposes.
A foreign company is not tax-robust merely because it has been formed. Controlled companies, passive income, low-taxed entities and foundation-related structures require early review of attribution, substance and documentation.
Core issues
Passive income
Licensing, interest, dividends, disposals or asset management may require separate review.
Substance and activity
People, decision routes, premises, costs and service providers must support the stated activity.
Review questions
- Who directly or indirectly holds and controls the foreign company?
- Which income is earned and from which activity?
- Is there low taxation and which activity or substance evidence may be relevant?
- Are there effective-management, permanent-establishment or transfer-pricing risks?
- How are distributions, loans, management fees, licence payments and intercompany services documented?
Outcome
- CFC risk matrix for entities, income, persons and jurisdictions.
- Document list for substance, contracts, invoices, resolutions and funds flow.
- Notes on follow-up duties, reporting obligations and ongoing documentation.