What is CFC foreign base company income?
Overview. Foreign base company sales income is the gross profit, commission or fee that a controlled foreign corporation (CFC) derives from a purchase or sale of personal property involving a related party.
What is foreign personal holding company income?
Foreign personal holding company income (FPHCI) is defined for U.S. controlled foreign corporation rules and, with modifications, for U.S. foreign tax credit rules. It consists of interest, dividends, rents, royalties, gains on property producing FPHCI, and certain other items.
What is excluded from foreign personal holding company income?
Foreign personal holding company income shall not include rents or royalties that are derived in the active conduct of a trade or business and received from a person that is not a related person (as defined in section 954(d)(3)) with respect to the controlled foreign corporation.
What is a personal holding company for IRS?
A corporation will be considered a personal holding company if it meets both the Income Test and the Stock Ownership Test. The Income Test states that at least 60% of the corporation’s adjusted ordinary gross income for the tax year is from certain dividends, interest, rent, royalties, and annuities.
Can a foreign corporation be a personal holding company?
Under Code section 542(c), the term “personal holding company” does not include a foreign corporation; therefore the personal holding company tax that is applicable to U.S. corporations is not applicable to FPHCs.
Is foreign personal holding income Subpart F?
FPHCI is a category of foreign base company income under subpart F income. FPHCI generally includes passive types of income such as interest, dividends, rents, royalties and sales of property held for investment.
What is the high tax exception?
What Is the GILTI High Tax Exception? On July 20, 2020, the IRS finalized regulations for the GILTI high-tax exception, which allows a complete exclusion of GILTI tested income from the federal taxable income of a U.S. shareholder that owns a CFC.
What type of income is Subpart F?
Subpart F income includes: insurance income, foreign base company income, international boycott factor income, illegal bribes, and income derived from a §901(j) foreign country, which are countries that sponsor terrorism or are otherwise not recognized by the US, such as Iran and North Korea.
What is a personal service company?
Personal service companies are limited companies that are usually set up to provide the services of one contractor. This contractor is often the company’s only shareholder and sole director. Unfortunately there’s no legal definition of the term, and HMRC has been accused of using this to its advantage when carrying out tax investigations.
What is foreign personal holding company income under Section 954?
(iii) The $9 of interest income is foreign personal holding income under section 954 (c) (1). Pursuant to § 1.446-3 (d), CFC recognizes $1 of swap income for its 1995 taxable year that is also foreign personal holding company income because it is income equivalent to interest under paragraph (h) (2) (i) (C) of this section. Example 4.
What is a foreign corporation?
The foreign corporation is a personal holding company (A corporation 60% of whose gross income comes from contracts for the personal services of specified individuals, and such specified individuals own at least 25% of the outstanding stock of such corporation)
What is the CFR section for foreign personal holding company income?
26 CFR § 1.954-2 – Foreign personal holding company income. § 1.954-2 Foreign personal holding company income. (1) Categories of foreign personal holding company income. For purposes of subpart F and the regulations under that subpart, foreign personal holding company income consists of the following categories of income –
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