Reglas CFC y precios de transferencia en el Reino Unido - Guía completa

Introduction to CFC Rules and Transfer Pricing

In international tax, Controlled Foreign Company (CFC) rules and transfer pricing are key tools to prevent profit shifting. Transfer pricing regulations require related-party transactions to be at arm’s length, ensuring that profits are appropriately recorded in each jurisdiction. However, CFC rules go a step further by taxing certain undistributed profits of overseas subsidiaries controlled from a high-tax country (like the UK) if those profits have been artificially diverted from the domestic tax base. We will explore why CFC rules exist alongside transfer pricing, how the UK’s CFC rules operate, and recent international developments (including UAE’s new corporate tax and global minimum tax) that impact these anti-avoidance frameworks. Below are the six key building blocks of BEPS Action 3’s recommendations for CFC rules.

Six Key Building Blocks of Effective CFC Rules (BEPS Action 3)

The OECD’s Action 3 final report outlines six essential components for designing robust CFC regimes.

In simple terms, these building blocks address which foreign entities are caught, what income is included, and how to tax it without double taxation. Below is an overview of each component and what it means:

1.Definition of a CFC rules:

Clearly defining what counts as a “controlled foreign company” is the first step. Typically, a CFC rules means a foreign corporation (or similar entity) that is controlled by domestic shareholders beyond a certain threshold. OECD guidance recommends a broad scope – not only traditional companies but also trusts, partnerships, and permanent establishments could be included if they earn income. Control is usually measured by ownership or rights. Both legal control (e.g. share ownership or voting rights) and economic control (rights to profits or assets) should be considered. Many countries set a control threshold around >50% ownership (by one or several domestic shareholders collectively) for an entity to be a CFC, though a lower percentage can be used if policy deems it necessary. For example, the UK counts a foreign company as a CFC if it is non-UK resident and controlled by UK residents, considering legal, economic, and even joint venture control tests. (We will see later that under UK law, if multiple UK companies together hold >50% of a foreign company, it’s a CFC rule, and any UK shareholder with at least 25% stake can be taxed on the profits. The broad definition ensures that multinationals cannot easily avoid CFC rules by using non-corporate entities or complex ownership chains.

2.CFC Exemptions and Threshold Requirements:

Not all foreign subsidiaries pose a risk of profit shifting. Effective CFC regimes include filters or exemptions so that only subsidiaries likely to be used for tax avoidance are targeted. The OECD recommends using thresholds to exclude low-risk cases and reduce administrative burdens. Common examples of such thresholds are:

De minimis thresholds: If the foreign subsidiary’s profits are below a certain small amount, CFC rules might not apply (on the basis that the compliance cost outweighs the small tax risk).

Low effective tax rate test: Subsidiaries that pay significantly lower tax than they would have paid in the parent’s country should be caught by CFC rules, whereas those paying a similar rate can be exempt. In practice, many regimes have a “high-tax exemption” – e.g. if the CFC’s effective tax rate is at least, say, 75% of the parent country’s tax rate, then CFC rules inclusion is not necessary. This focuses the rules on subsidiaries in zero or very low-tax jurisdictions.

Other exemptions: Some countries exempt certain types of entities or income entirely. For instance, if a subsidiary is engaged in genuine local business (active trade) and not just a passive income conduit, it might be exempt. The idea is to carve out entities that exist for genuine commercial reasons and pose little risk to the home country’s tax base. In summary, these building blocks ensure CFC rules target the right companies – those with low-taxed profits or mainly passive income – and skip those with minimal risk or normal taxation.

3.Definition of Income to be Included (CFC Income):

Once a CFC is identified, rules must decide what portion of the CFC’s income should be attributed to the parent for taxation. The OECD recommends having a clear definition of CFC income. There are a few approaches:

• Categorical approach: Specify categories of income that are considered movable or easily shifted (often called passive income) such as dividends, interest, royalties, certain insurance or leasing income, and related-party sales or service income. These categories are more likely to be artificially shifted to tax havens. Income falling into these categories (and not arising from substantive activities) would be treated as CFC income.
  
• Substance analysis: This asks whether the CFC had the capability to earn the income itself through people and assets in its own locale. If, for example, a small offshore subsidiary earns large royalties but has no employees or research activity, a substance test would flag that income as attributable (since the profit likely came from assets/risks developed elsewhere).
  
• Excess profits analysis: This method identifies income in excess of a “normal” return on activities as CFC income. It’s often aimed at intellectual property (IP) or risk-shifting. For instance, if a tax-haven subsidiary earns abnormally high returns relative to its tangible assets and payroll, the excess may be deemed attributable profit.
  Countries can use an entity approach (all-or-nothing: treat the entire profit as CFC income if the majority is passive) or a transactional approach (pick out specific income streams). The OECD leans toward a transactional approach for accuracy, meaning even if a CFC has mixed income, only the tainted income is picked up. In practice, many modern CFC regimes (including the UK’s) define taxable CFC income mostly by listing passive income types or income arising from artificial arrangements.

4.Computation of Income:

This building block addresses how to calculate the CFC’s income for tax purposes. The question arises: do we use the CFC’s local accounting/tax rules or the parent company’s home rules to measure profit? The OECD recommends using the parent jurisdiction’s tax rules for consistency. In other words, pretend the CFC’s income was earned by a local company – apply the home country’s tax principles (for recognizing revenue, deductions, etc.) to compute the amount of profit to tax. This prevents manipulation of different accounting standards. Another important aspect is how to treat losses: The guidance suggests that losses of a CFC should only offset its own profits (or perhaps other CFCs in the same country), not the parent’s other income. This prevents a scenario where a loss in a haven affiliate reduces taxable income in the high-tax parent jurisdiction. Essentially, profit computations are aligned with home standards and siloed per CFC, ensuring the amount brought into tax is appropriate.

5.Attribution of Income:

Once we know a CFC’s taxable income, we must decide which shareholders get taxed on it, when, and at what rate. The OECD lays out a multi-step process:

• Which shareholders to tax: Ideally, any domestic shareholder with at least the minimum control threshold (from point 1) should have to include the CFC’s income.
  
• Some countries might set a higher threshold for attribution to reduce burden on very small investors, but in principle if you have significant control, you’re in the net. (For example, a country might require attribution only if the shareholder owns ≥10% or ≥25%, even if the CFC is defined at >50% collective control. The UK uses 25% as the threshold for a UK company to be charged on a CFC’s profits.
  
• How much income to attribute: This is usually proportional to the shareholder’s ownership stake and period of ownership. If a parent owns 100% of the CFC for the full year, it picks up 100% of the CFC’s attributable income. If it owned 50% or only part of the year, only that portion is attributed.
  
• Timing and treatment: Countries decide when the income inclusion happens (typically each tax year) and how to treat that inclusion under domestic law. Often it’s simply added to the parent’s taxable income as a deemed dividend or separate charge.
  
• Tax rate: CFC income is generally taxed at the parent jurisdiction’s normal corporate tax rate (since the goal is to tax it as if it had been earned at home). We’ll see this in the UK case, where any CFC charge is at the UK corporation tax rate. In summary, attribution rules ensure the right taxpayers include the right amount of foreign profit in their taxable income, aligning with their ownership and timing.

Prevention and Elimination of Double Taxation:

A well-designed CFC regime should avoid double taxing the same income. There are several scenarios to consider. First, the CFC’s profit might also be taxed locally in the foreign country. Second, more than one country might have CFC claims on the same subsidiary (e.g., two co-parents in different countries). Third, if the profit is later paid out as an actual dividend to the parent, it could be taxed again. The OECD recommends measures to relieve these situations: for foreign taxes paid, the parent country should give a tax credit for those taxes against the CFC inclusion. This way, if a CFC paid, say, 5% tax abroad, the home country would only charge the difference up to its rate (avoiding more than 100% total tax). If two countries’ CFC rules overlap, typically only one will tax or they will offer credits to each other. For actual dividends or gains on selling the CFC shares, the advice is to exempt them if the underlying profits were already taxed via CFC rules. In practice, many countries simply extend their normal participation exemption to such dividends. For example, if a parent has already included a subsidiary’s earnings as CFC income, when those earnings are paid out as a dividend later, that dividend can be received tax-free. These mechanisms ensure companies aren’t penalized with double taxation for the same income – the goal is to tax once, appropriately, in the parent jurisdiction.

It’s important to note that BEPS Action 3 is not a minimum standard (countries aren’t forced to adopt CFC rules), but it’s strong guidance. Many jurisdictions, especially OECD and G20 members, have aligned their laws with these principles to protect their tax base.

Why CFC Rules Are Necessary (Beyond Transfer Pricing)

CFC rules were developed because governments recognized that transfer pricing alone was not sufficient to protect the tax base. Certain structures can bypass transfer pricing rules, resulting in profits being inappropriately allocated to low-tax subsidiaries even when transactions formally follow arm’s length prices. For example, a multinational might shift intangible assets or risk capital to an offshore subsidiary; even if that subsidiary “pays” the parent a fair price for those assets under transfer pricing, much of the group’s profit may still accumulate tax-free offshore. UK CFC rules (first introduced in the 1980s and overhauled in 2012) specifically target “artificially diverted” UK profits that wouldn’t be caught by transfer pricing alone. These rules ensure that passive or mobile income parked in tax havens can be taxed by the parent’s jurisdiction if certain conditions are met.

Importantly, even the OECD acknowledges that after applying transfer pricing, countries may still need CFC rules or similar anti-abuse measures to tax remaining profits. CFC rules therefore act as a backstop: they prevent companies from simply retaining earnings in low-tax subsidiaries to avoid home-country tax. This reduces the pressure on transfer pricing enforcement and provides a more definitive defence against profit diversion. In summary, transfer pricing governs pricing of cross-border transactions, whereas CFC rules can tax entire pools of income shifted to low-tax entities, providing a broader safeguard for the tax base.

Overview of UK CFC Rules

The UK’s CFC rules are among the most developed, aiming to strike a balance between protecting the tax base and not deterring genuine business investment overseas. A Controlled Foreign Company is generally an overseas company in which UK persons (usually companies) have more than 50% control. If a UK corporation owns (or together with related parties controls) such a foreign subsidiary, the UK’s CFC rules may tax certain profits of that foreign subsidiary as if they were the UK company’s own profits, unless an exemption or exclusion applies.

How the UK CFC Rules Work

UK CFC rules use a series of gateway tests to identify profits that are artificially diverted from the UK. The default approach is that all profits of a CFC are potentially taxable in the UK, but only if they pass through specific filters/gateways designed to exclude commercially-driven income. In practice, the rules examine factors such as:

• Significant UK People Functions: Does the CFC’s profit arise from assets or risks that are managed from the UK? Profits attributable to UK activities or decision-making are more likely to be caught.
  
• UK Connected Expenditure: Was the CFC’s income earned from funds or assets that originated from the UK (for example, capital or intellectual property transferred from the UK)?
  
• Arrangement Artificiality: Are there arrangements that lack economic substance aside from achieving a tax benefit? The rules look at whether the CFC could have earned the income without the group’s UK operations.

Only profits that fail these gateway tests (indicating a high likelihood of UK profit diversion) are subject to a CFC charge. Notably, the UK parent (or controlling company) will then include those flagged foreign profits in its taxable income and pay UK corporation tax on them.

Exemptions and Safe Harbors under UK CFC Rules

To avoid penalizing normal commercial structures, the UK CFC rules provide several exemptions/safe harbors so that only truly artificial diversion is taxed.

Exempt Period (New Subsidiaries)

New foreign subsidiaries are often given a grace period. Under the exempt period exemption, a CFC’s profits are usually not taxed in the UK for the first 12 months after it comes under UK control. This allows groups to restructure or wind-down foreign entities without immediate tax exposure.

Low-Profit Exemption

If a CFC’s accounting profits are below a certain monetary threshold (e.g. £50,000 of trading profit or £500,000 of non-trading profit), it qualifies for the low-profit exemption. Such small amounts of profit are deemed insufficient to pose a tax avoidance risk, so the UK CFC rules ignore them.

Exención por bajo margen de beneficio

Similarly, even if absolute profits are higher, a CFC can be exempt if its profit margin is very low (under 10%). The low profit margin exemption recognizes that entities with modest returns on their activities are unlikely to be vehicles for profit diversion. If a CFC’s profits are less than 10% of its operating expenses, it generally falls outside the CFC rules.

Territorios excluidos Exención

The UK maintains a list of excluded territories – jurisdictions with tax systems deemed sufficiently robust or comparable to the UK. If a CFC is resident in one of these territories and meets certain conditions, its profits are exempt from UK CFC taxation. This exemption prevents double taxation in cases where the foreign profits are already taxed at an acceptable effective rate locally. (For example, a subsidiary in a country with a corporate tax rate above 75% of the UK rate might qualify.)

Intragroup Financing (Partial Exemption)

The UK CFC rules include a partial exemption for certain financing income (often called the “finance company exemption”). In short, if a CFC’s profits consist of interest or financing returns, only a portion of that income (based on a statutory formula) may be taxed under CFC rules, resulting in an effective UK tax rate of about 5–6% on qualifying intra-group financing profits. This acknowledges that groups often centralize financing in low-tax hubs for non-tax reasons, and it encourages repatriation of cash to the UK with minimal tax cost, rather than holding cash offshore indefinitely.

Interaction of UK CFC Rules and Transfer Pricing

It’s important to understand how CFC rules and transfer pricing work together. Generally, transfer pricing adjustments (which increase a UK company’s income or reduce its deductions to reflect arm’s-length pricing with affiliates) are applied before any CFC inclusion. The UK tax code ensures there’s no double taxation of the same profit under transfer pricing and CFC provisions. For instance, if a UK company undercharged its foreign subsidiary for a service, UK transfer pricing rules would increase the UK company’s income. If that same profit is also considered diverted and picked up under CFC rules, the rules provide credits or offsets so that profit isn’t taxed twice. HMRC’s guidance explicitly addresses this interaction to prevent double-counting.

Conversely, there may be scenarios where transfer pricing moves profits between two foreign subsidiaries (both CFCs from a UK perspective). For example, one CFC’s income might increase (and another’s decrease) due to a transfer pricing adjustment. The UK CFC rules will only tax the net diverted profits—they won’t penalize the group for internal reallocations that don’t ultimately extract profit from the UK tax net. In practice, CFC rules pick up where transfer pricing leaves off: after all arm’s-length pricing is applied, if significant profits still accumulate in a low-tax entity without substantial local activities, the CFC rules step in to tax those profits in the UK (Corporate Tax Reform: delivering a more competitive system).

Illustration: Comparison of a UK vs. UAE parent company with a low-tax foreign subsidiary and the effect of CFC rules. In the UK scenario (grey), the UK Parent Co. must include the low-tax subsidiary’s profits in its taxable income under CFC rules, incurring UK tax (25%) on those profits. In the UAE scenario (yellow), the UAE Parent Co. currently faces no such automatic inclusion – the subsidiary’s profits are not taxed in the UAE due to the absence of CFC rules. Only if the profits are repatriated as a dividend might UAE tax apply, and even then the dividend could be exempt under participation rules. This contrast shows how UK companies are taxed on passive offshore income, whereas UAE companies can more easily defer or avoid tax on such income (within the limits of GAAR and other anti-abuse provisions).

In the figure above, both parent companies own >50% of their foreign subsidiaries, which are located in a zero-tax jurisdiction. The offshore subsidiaries earn profits (perhaps from group services, royalties, or financing). Under a typical CFC rule like the UK’s, the mere fact that those profits are low-taxed and controlled by a domestic parent triggers a tax in the parent’s hands. The UK parent is subject to a CFC charge on the subsidiary’s income, as explained earlier – effectively nullifying the tax benefit of the offshore haven. The UAE parent, by contrast, has no CFC charge and thus the offshore profits remain untaxed by the UAE. This could give UAE-based groups a tax advantage in structurings that involve low-tax jurisdictions, at least until the UAE potentially implements CFC rules.

To put it succinctly, UK-headquartered multinationals need to be very careful with holding income in low-tax subsidiaries, as UK HMRC will likely find a way to tax it via CFC legislation (unless genuine business reasons or exemptions apply). UAE-headquartered multinationals currently have more leeway – they can use low-tax jurisdictions with fewer immediate tax consequences, which is attractive for deferring tax or achieving a lower global effective tax rate. However, UAE groups with international operations should also consider the flip side: other countries’ CFC rules might apply to them. For example, if a UAE company has a subsidiary in another Gulf country that eventually implements CFC rules, or if a UAE group has significant shareholders or co-owners in countries with CFC regimes, those regimes could tax the profits that the UAE does not.

UAE Developments and the Global Context

The international landscape for anti-avoidance rules is evolving. The United Arab Emirates, historically a no-tax jurisdiction with no CFC rules, has introduced significant changes that affect how groups plan their structures:

Economic Substance Regulations (ESR) in the UAE (2019–2022)

The UAE’s Economic Substance Regulations were in effect from 1 January 2019 to 31 December 2022 and required companies in certain sectors to demonstrate adequate economic activity in the UAE. These regulations were implemented to address concerns (especially of the EU and OECD) that UAE entities were being used for profit shifting. Under ESR, companies had to maintain adequate employees, premises, and income-generating activities in the UAE relative to their business. While ESR helped curb pure shell companies, it was a stop-gap measure until broader tax reforms took place. Notably, ESR is no longer active from 2023 onwards, as the UAE moved to a new system of corporate taxation.

UAE Introduces Corporate Tax (2023) – Qualifying Free Zone Persons

In 2023, the UAE enacted its first federal corporate tax at a 9% rate, marking a major shift. To continue encouraging investment, the law allows free zone businesses to maintain a 0% tax rate on their qualifying income if they qualify as “Qualifying Free Zone Persons” (QFZPs). This means a Free Zone entity must meet specific conditions (e.g. adequate substance and earning only permitted types of income) to enjoy the 0% rate; otherwise, it pays 9% like mainland companies. The UAE Cabinet and Ministerial Decisions in 2023 detail these tests. In essence, free zone tax breaks are no longer blanket exemptions – they are conditional. A QFZP with qualifying income pays 0% on that income, but any non-qualifying income is taxed at 9%. As KPMG notes, the UAE corporate tax law provides QFZPs a 0% rate on qualifying income and 9% on taxable income that is not qualifying income.

This change is relevant from a CFC rules perspective: UK groups with UAE subsidiaries must consider that those subsidiaries might now be subject to UAE tax unless they are QFZPs. If a UAE subsidiary pays 9% tax (or even 0% as a QFZP), the UK’s CFC inclusion will account for actual tax paid. Profits of a UAE entity that is genuinely a QFZP at 0% might still be targeted by UK CFC rules (since 0% tax could be seen as low-tax), but the analysis will factor in whether that income was genuinely earned with substance in the Free Zone.

Global Minimum Tax (Pillar Two) – Effective 2025

Perhaps the most significant recent development is the advent of the OECD’s Global Minimum Tax (Pillar Two) rules. From 1 January 2025, many countries including the UK and UAE (as part of the OECD Inclusive Framework) are implementing a 15% global minimum tax on large multinational groups (those with over €750 million in consolidated revenue). Pillar Two operates via an Income Inclusion Rule (IIR) similar in spirit to CFC rules: if a subsidiary’s profits are taxed below 15% locally, the parent’s country will impose a top-up tax to bring the effective rate to 15%. For instance, consider a UK-parented group with a UAE Free Zone subsidiary that pays 0% tax. If the group’s revenues exceed €750m, the UK will apply a top-up tax so that a 15% rate is paid on the UAE earnings, even if UAE law offers 0%. In effect, Pillar Two will ensure a minimum global tax rate, reducing the incentive to shift profits to zero-tax entities for large MNEs.

It’s important to note that Pillar Two doesn’t replace CFC rules but will work alongside them. The UK is introducing its own qualified domestic minimum top-up tax and income inclusion rules consistent with the Pillar Two model. For large groups, the UK might collect the 15% minimum tax under Pillar Two on profits of low-tax subsidiaries. The CFC rules could still apply on profits above that (since UK’s corporate tax rate is higher than 15%), but the mechanics may get complex and likely the CFC charge would be reduced by any Pillar Two top-up already applied. For smaller groups below the €750m threshold, traditional CFC rules remain the main tool, since Pillar Two wouldn’t apply to them.

Figure: Timeline of key UAE and global tax changes. The UAE’s ESR regime (2019–2022) was phased out as the UAE introduced a 9% corporate tax in 2023/24. Starting in 2025, the OECD’s Pillar Two imposes a 15% global minimum tax on large multinationals. These developments intersect with CFC rules, as global tax convergence may reduce opportunities for profit diversion.

Overall, these global reforms indicate a trend: CFC rules are being complemented by newer measures like global minimum tax to ensure profits face a baseline level of taxation. Companies must navigate both sets of rules. In the UAE context, the 0% tax advantage for Free Zones is now narrower, and large multinationals will anyway face a 15% floor on tax. A UK company with foreign subsidiaries must consider: will UK CFC rules apply, or will Pillar Two apply, or both? Navigating these requires careful analysis.

Conclusion on CFC Rules

Both CFC rules and transfer pricing remain fundamental in international tax compliance. The UK’s CFC rules demonstrate how a jurisdiction can protect its tax base against artificial profit shifting, ensuring that simply booking income in a zero-tax entity doesn’t put it permanently beyond the reach of the tax authorities. At the same time, robust transfer pricing documentation is still essential – it helps show that profits allocated to foreign affiliates are justified by real activities, which can prevent a CFC charge from arising in the first place (since genuine business profits are often covered by exemptions).

With the introduction of the global minimum tax and changes like the UAE’s new tax regime, the landscape is shifting toward higher transparency and a baseline tax level. Tax advisors now must consider an interplay of rules: CFC rules, transfer pricing, economic substance requirements, and minimum tax obligations. The positive news is that these rules, while complex, share a common goal of aligning profits with substance and discouraging tax-driven structures. Businesses that align their operating model with genuine commercial substance – having real functions, decisions, and risks in the locations where profits are booked – will find that CFC rules and related measures are manageable hurdles rather than punitive barriers.

In summary, UK CFC rules and transfer pricing provisions, reinforced by new global standards, form a multi-layered defense against profit shifting. Multinationals should periodically review their structures (e.g., financing hubs, IP holdings, and offshore subsidiaries) under these evolving standards. By doing so, they can minimize the risk of unexpected tax exposure and ensure compliance in all jurisdictions where they operate. This updated analysis underscores that CFC rules are here to stay – now augmented by global tax reforms – and they remain a critical consideration for any cross-border tax planning strategy.