CFC
A controlled foreign corporation is a foreign corporation more than 50% owned by qualifying U.S. shareholders under U.S. tax ownership rules.
U.S. cross-border investment tax terms covering PFIC and CFC classifications, foreign tax credits, ownership tests, elections, and reporting.
Foreign investment taxation connects an investment’s legal form and ownership to income inclusions, distributions, basis, credits, elections, and reporting. A foreign fund or holding company may look like an ordinary investment but produce specialized U.S. tax treatment.
Use Passive Foreign Investment Company when classification turns on a foreign corporation’s passive income or passive assets. Use Controlled Foreign Corporation when control by qualifying U.S. shareholders is central. Use Foreign Tax Credit when qualifying foreign income tax may reduce U.S. tax on foreign-source income.
| Concept | Classification or relief question | Typical evidence |
|---|---|---|
| PFIC | Does a foreign corporation meet a passive-income or passive-asset test? | Financial statements, asset values, income classification, shareholder records |
| CFC | Do qualifying U.S. shareholders meet the applicable control test? | Capitalization table, voting rights, value, attribution analysis, ownership dates |
| Foreign tax credit | Is a foreign levy creditable, and what limitation applies? | Foreign return, assessment, withholding statement, income-source and category workpapers |
The labels do not determine the answer by themselves. Ownership attribution, indirect holdings, entity elections, income sourcing, tax treaties, and current form instructions can materially change the result. This section is educational and is not tax, legal, accounting, investment, or filing advice.
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A controlled foreign corporation is a foreign corporation more than 50% owned by qualifying U.S. shareholders under U.S. tax ownership rules.
The U.S. foreign tax credit can reduce double taxation of foreign-source income, subject to creditability, sourcing, category, and limitation rules.
A PFIC is a foreign corporation meeting a passive-income or passive-asset test, potentially triggering specialized U.S. shareholder tax and reporting rules.