CFC rules (Controlled Foreign Company)
Controlled Foreign Company (or Corporation) rules let a country tax its resident companies on the profit of their low-taxed foreign subsidiaries, as if that profit had been paid up as a dividend. The point is to stop the "deferral" trick, where profit sits in an offshore subsidiary indefinitely and is never taxed at home. If a UK, US, Australian, Canadian or Indian company controls a foreign subsidiary that pays little or no local tax, some or all of that income can be attributed back to the parent and taxed. The OECD's BEPS Action 3 sets recommended standards. Regimes differ widely: the US version is now NCTI (formerly GILTI), and each of the other countries has its own CFC rules.
ByLoopholeKiln EditorialPublished
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Example: a company sets up a Cayman Islands subsidiary and parks investment income there; the home country's CFC rules tax that income at home anyway, as though it had been distributed.
Why it matters to a small business: CFC rules are meant to protect each country's tax base, but complying with them is complex and expensive, and large groups employ specialists to structure right up to the legal limit. You have no foreign subsidiary, so the rules neither help nor hinder you; they simply mark another arena built for big companies.