(13) For the purpose of this section, where, at any time, two corporations resident in Canada are related (otherwise than because of a right referred to in paragraph 251(5)(b)), any corporation that is a controlled foreign affiliate of one of the corporations at that time is deemed to be a controlled foreign affiliate of the other corporation at that time.

The general purpose of the UK's Controlled Foreign Company (CFC) rules is to prevent UK companies from using a subsidiary, based in a low or no tax jurisdiction, to avoid taxation in the UK.

The proposed Controlled Foreign Company (CFC) rule should discourage them from doing this.

a) Controlled Foreign Company (CFC) rule: To deter profit shifting to no or low tax countries

For example, all Member States will now have the power to tax profits being moved to low-tax countries where the company does not have any genuine economic activity (CFC rules).

121. Calls on the Commission to issue clear legislation on the definition of economic substance, value creation and permanent establishment, with a view to tackling, in particular, the issue of letterbox companies, and to develop EU criteria and legislation for the treatment of R&D, compatible with, but not limited to, the work of the OECD on the matter, since Member States are currently reforming their strategy in that regard, often cumulatively with subsidies; stresses that such legislation should clearly indicate that there must be a direct link between the preferential regimes granted by the tax administration and the underlying R&D activities; calls on the Commission to revise EU legislation on ...[+++]controlled foreign companies and its application in accordance with the Cadbury Schweppes judgment of the European Court of Justice (C-196/04) in order to ensure full use of controlled foreign companies beyond situations of wholly artificial arrangements to avoid cases of double non-taxation; calls on the Commission to make proposals for harmonising rules on controlled foreign companies in the EU;