Actual Problems of Optimizing the Legal Mechanism of Taxation of Controlled Foreign Companies: the Experience of Russia and Foreign Countries

Abstract

The legislation of the Russian Federation in terms of taxation of controlled foreign companies (CFCs) has undergone significant changes. In fact, a unified imputed tax has been introduced on the income of such organizations. The article attempts to predict the mechanism for the implementation of innovations, shows the positive and negative aspects of the single tax rate. The foreign tax legislation is considered, which regulates many ways of determining the profit of a CFC, subject to taxation, and establishes various rules for imputing this profit to a controlling person. Much attention is paid to techniques that can be classified into two types: transactional and jurisdictional. The main difference between them: 1) transactional means taxing only that part of the CFC's income that is conventionally referred to as «tainted» income, that is, it means income used for tax evasion purposes; 2) jurisdictional - the location (registration or actual activity) of the CFC in a certain (usually offshore) jurisdiction, and if the jurisdiction meets the established criteria, then the entire income of the CFC is subject to taxation. Also on the basis of referring to the experience of foreign states and to the recommendations of the OECD, the prospects for improving the legal regulation of taxation of profits of controlled foreign companies were identified.