When do EU CFC rules apply?

CFC rules apply when: a resident taxpayer controls (directly or indirectly) an entity or permanent establishment in a low-tax jurisdiction (ETR less than 50% of home country rate) with non-distributed passive income.

What income is included under Approach A?

Approach A (used by Germany): all non-distributed income of the CFC if the effective tax rate is below the threshold. An escape applies if the CFC has genuine substance (staff, premises, decisions made locally).

What income is included under Approach B?

Approach B (used by UK, France): only specific passive income categories are included: dividends, IP income, financial income, sales income from related parties, services income from related parties.

What is the substance exemption?

CFC rules do not apply if the entity carries out a genuine economic activity (undertaking sufficient economic substance in its jurisdiction). Tests typically include: local staff, management decisions, infrastructure.

How do CFC rules interact with Pillar Two?

Pillar Two (GloBE) and CFC rules both address low-tax jurisdictions but differently. CFC rules attribute income to the parent; GloBE imposes top-up tax at the subsidiary level. Both may apply simultaneously, requiring careful coordination.

EU Controlled Foreign Company (CFC) Rules Calculator

Calculate CFC inclusion income under EU ATAD rules. Required for all EU member states: attribute subsidiary income if effective tax rate below 50% of home rate. Approach A (full inclusion) vs Approach B (categories).

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Annual Rate (%)

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$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate CFC inclusion income under EU ATAD rules. Required for all EU member states: attribute subsidiary income if effective tax rate below 50% of home rate. Approach A (full inclusion) vs Approach B (categories). Use the eu cfc rules result to inform your calculation.

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Frequently Asked Questions

When do EU CFC rules apply?

What income is included under Approach A?

What income is included under Approach B?

What is the substance exemption?

How do CFC rules interact with Pillar Two?