CFC rules: the company that follows you

What is actually true

• The mechanism is consistent even when the details differ. If you control a foreign company that pays little or no tax, your country of residence taxes you on its income as it arises, without waiting for a dividend. Control is usually defined by capital, voting rights or profit entitlement, typically at 50%, and typically aggregating your interests with those of associates and related parties.
• The critical distinction for private clients is whether these rules reach individuals at all. Some states apply CFC rules directly to resident individuals. Italy, Spain, Germany, Sweden, Finland, Denmark, Portugal and the US are among them. Others, including France, the Netherlands and Belgium, confine CFC rules to corporate residents and address individuals through separate anti-abuse or deemed-income regimes. Moving from a country in the second group to one in the first can turn a dormant structure into an annual tax liability.
• In the EU, the floor is set by ATAD, Directive 2016/1164, adopted 12 July 2016. It required all Member States to adopt CFC rules from 1 January 2019 and it defines control by reference to a taxpayer acting alone or together with its associated enterprises. Member States chose between Model A, which attributes specified categories of passive income, and Model B, which attributes income from non-genuine arrangements. Both are floors. Several states go further.
• The US is a category of its own, and it reaches individuals hard. A US shareholder of a CFC faces Subpart F inclusions. For tax years beginning after 31 December 2025, the regime formerly called GILTI has been renamed Net CFC Tested Income, or NCTI, by the One Big Beautiful Bill Act. The QBAI routine-return carve-out has been repealed, which broadens the base. The old planning move of parking tangible assets in the CFC to shelter a 10% return is gone.
• The §962 election is the standard US mitigation, and it changed in 2026. An individual US shareholder can elect under §962 to be taxed at corporate rates on Subpart F and NCTI inclusions and to claim indirect foreign tax credits. For tax years beginning after 31 December 2025, an individual making the §962 election generally gets access to the 40% §250 deduction against NCTI, and the indirect FTC cap rises from 80% to 90%. None of this is free. The election accelerates the analysis, and the eventual actual distribution can be taxed again above previously taxed earnings.
• Relocation interacts with CFC rules in both directions, and it is the second direction people forget. Leaving a CFC jurisdiction can free a structure. Arriving in one can capture a structure that has sat quietly offshore for twenty years. The arrival is usually the moment nobody is watching, because the client's attention is fixed on the visa.

Jurisdiction by jurisdiction

United States high

This covers Subpart F and NCTI, the tax formerly known as GILTI, renamed under the OBBBA for tax years beginning after 31 December 2025. The QBAI carve-out is gone, which widens the tax base. Individual US shareholders can still elect §962 treatment, taxing the income at corporate rates instead. From 2026, that election generally opens the door to the 40% §250 deduction and a 90% indirect foreign tax credit cap, up from 80%. None of this depends on where you live. It applies to US citizens and residents wherever they are, because the CFC rules follow the person, not the company.

Italy high

Italy applies its CFC rules directly to resident individuals. The real complexity comes from how these rules interact with the article 24-bis neo-residenti regime. The substitute tax under that regime covers foreign-source income, but the CFC analysis stays very much alive for anyone outside the regime, or in the process of leaving it. Arriving in Italy with an offshore holding company, without first clearing your CFC position, is a well-known and costly mistake.

Spain high

Spain applies its own CFC regime, transparencia fiscal internacional, to resident individuals, attributing specified passive income earned through low-taxed controlled entities back to the individual. Combine that with Spain's wealth tax and the article 95 bis exit tax, and Spain becomes one of the least forgiving places in Europe for a founder holding a private company through an offshore vehicle.

Germany high

Germany's Hinzurechnungsbesteuerung, the CFC regime under the AStG, applies to resident individuals who hold controlling interests in low-taxed foreign companies earning passive income. It sits alongside the §6 AStG exit tax, so a German-resident founder faces exposure on two fronts. The CFC rules apply while resident, and the Wegzugsteuer applies on departure.

United Kingdom medium

UK CFC rules work at the entity level. They apply to companies, not to resident individuals. Individuals fall instead under the transfer of assets abroad code and the s. 13 TCGA-style attribution of gains. Post-Brexit, ATAD does not apply to the UK. So for a UK-resident individual holding an offshore company, the CFC code is not where the exposure lies. The transfer of assets abroad rules are.

France / Netherlands / Belgium medium

CFC rules apply to corporate residents, not directly to individuals. Separate anti-abuse regimes cover individuals instead. France's art. 123 bis is the closest analogue, and it does reach individuals holding 10%+ of low-taxed foreign entities. This corporate/individual split is jurisdiction-specific and it is shifting. Do not treat the absence of individual CFC rules as a durable feature.