With the current economic crisis, companies from all over
the world are finding ways to lower down the overhead expenses and their
operational cost. There are many ways to do this but the recent trend is
to outsource the jobs on other countries that have lower cost of living
that can provide services with more than 50% less of the original cost
of what they are spending when hiring onshore services.
We really can’t blame these companies who are doing this
especially that their only purpose is to save capital to either grow and
expand their business or save it from falling apart. At the end of the
day, a business is still a business and everything boils down to how
much they earned for the day regardless if they are using an onshore or
offshore service.
One question and issue for such business moves is the
issue of tax. We all know that tax is important to keep the funding of a
certain state or community. The government also spends money for
maintaining our roads and parks and other vital things that a community
needs to survive. This is where our taxes are going. Although these
companies chose to outsource some jobs, it is still proper for them to
contribute as tax payer after all it is the people in this state or
country that is conducting business with them and giving them profit.
This is
where the Controlled Foreign Company Rules or better known as CFC comes
into play. Almost every country has one and that includes France. Every
place has a different CFC rule that is dominant in their country and may
vary from one place to another. Basically CFC is a conception telling a
legal entity that is located in a foreign
jurisdiction but is owned or
controlled
by tax-residents of a different jurisdiction. Now there are some rules
that come with this when it comes to paying taxes and exemptions.
The main purpose of CFC is to avoid tax evasion and
misrepresentation of tax. This makes it fair for businesses onshore when
it comes to paying for taxes. Hence French Companies that are subject to
the CFC rules must file a return for the income and profit for its
foreign subsidiaries or branches taxable in France. The French CFC rules
caters to more than 50% owned or controlled foreign subsidiaries or
permanent establishments of a French Company if the taxation that is
locally done is less than one half of the French rate.
CFC rules can be quite hard to understand but with the
guidance of professionals can be better understood. As a company, there
should be a certain level of respect when it comes to paying taxes
otherwise the end result will not be favorable. Tax evasion is
punishable by law and you don’t want to be on that black list.
