Anti-base erosion profit shifting (BEPS) measures

  1. Overview
  2. Controlled Foreign Company (CFC) rules
  3. Anti-hybrid rules
  4. Exit Tax provisions

Controlled Foreign Company (CFC) rules

CFC rules prevent the artificial diversion of profits from controlling companies to CFCs (offshore entities in low-tax or no-tax jurisdictions).

The rules operate by attributing undistributed income of a CFC to the controlling company or a connected company in the State. Undistributed income might arise from non-genuine arrangements, put in place for the essential purpose of obtaining a tax advantage.

A CFC’s undistributed income is attributed to the controlling, or connected company, in the State for taxation purposes where relevant Irish activities are carried out. Relevant Irish activities are:

  • significant people functions (SPFs)
  • key entrepreneurial risk-taking functions (KERTs).

The CFC charge arises on the portion of undistributed income attributable to relevant Irish activities.

The rules require an analysis as to the extent to which the CFC, were it not for the controlling company, would:

  • hold the assets
  • or
  • bear the risks of undertaking the SPFs or KERTs.

The CFC legislation has effect for accounting periods of controlling companies commencing on or after 1 January 2019.

For more information refer to Tax and Duty Manual Part 35b-01-01 - Controlled Foreign Companies Rules.

Note

Part 35B of the Taxes Consolidations Act 1997 implements Articles 7 and 8 of the EU Anti-Tax Avoidance Directive (EU) by introducing CFC rules.

Next: Anti-hybrid rules