Controlled Foreign Company rules curb profit shifting by attributing low taxed foreign subsidiary income to parent taxpayers.

CFC rules prevent profit shifting by attributing income of low tax foreign subsidiaries to controlling parents. BEPS Action Plan 3 recommends six building blocks: clear definitions of CFCs and CFC income; meaningful effective tax rate thresholds for exceptions; computation of attributed income using parent jurisdiction rules with limited loss offsets; attribution tied to control and proportionate ownership; and mechanisms to prevent or eliminate double taxation through foreign tax credits and relief on dividends or disposals. These recommendations are flexible to accommodate domestic policy and international obligations; India currently lacks specific CFC rules in its Income Tax Act.

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