Commentary

D4.404 Definition of control for CFC purposes

Corporate tax
Corporate tax | Commentary

D4.404 Definition of control for CFC purposes

Corporate tax | Commentary

D4.404 Definition of control for CFC purposes

In broad terms, a company will be 'controlled' by any person or persons who (directly or indirectly) have 'legal' control or 'economic' control of the company, or who have control of the company by reference to accounting standards. Special rules (outlined below) apply to banks, international joint venture companies, and cell companies.

Legal control of CFCs

A person controls a company if they have the power to secure that the affairs of the company are conducted in accordance with their wishes1:

  1.  

    •     by means of the holding of shares or the possession of voting power in that or any other company, or

  2.  

    •     by virtue of any powers conferred by the articles of association or other document regulating that or any other company

The scope of documents falling within the second bullet point above is not limited to documentation required by local law in the country of incorporation of the CFC. A shareholders' agreement, for example, could have the effect of conferring legal control of a company on a particular person or persons. Moreover, the test is not a mechanical one based simply on, for example, shareholdings or voting rights. The aim is to establish whether a person (or persons) has the power to ensure that the affairs of the company are conducted in accordance with their wishes. If such power is exercisable only as a result of share holding, it is to the shareholdings that one would look to determine control but it will

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial