OECD Calls for Broad Definition of Controlled Foreign Corporation

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April 3 — The Organization for Economic Cooperation and Development recommended a broad definition of a controlled foreign corporation in the latest discussion draft under its base erosion and profit shifting project, but wasn't able to settle on a CFC income definition.

The draft, issued April 3 in response to Action Item 3 under the BEPS framework, said that in addition to corporate entities, CFCs should include partnerships, trusts, and permanent establishments when those entities are either owned by CFCs or treated in the parent jurisdiction as taxable entities separate from their owners.

The OECD also recommended a modified hybrid mismatch rule that would prevent entities from circumventing CFC rules by being treated differently in different jurisdictions.