The anti-tax avoidance system for controlled foreign companies (CFC) has been in effect for approximately two years. Enterprises should now be aware that the regulatory authorities treat the current year's earnings of a CFC as distributed and subject to taxation in advance, thereby eliminating the ability to defer tax liabilities through a CFC. Even if the relevant exemption requirements are met, the company are still required to file declarations in accordance with regulations and submit the necessary documentation.

According to the Ministry of Finance’s directive Tai-Cai-Shui-Zi No. 11304678970 issued on February 4, 2025, if the preparation of CFC financial statements, the audit and attestation by accountants, or the time required to obtain other sufficient documentation to verify the authenticity of CFC financial statements and confirmed by the tax authorities at the individual's place of residence or the business entity's location, makes a CFC unable to complete the relevant procedures by the end of January each year, it may use self-assessed earnings on the CFC financial statements as the basis for trust income declaration. This approach is intended to accommodate practical operational needs.

While this measure provides a degree of flexibility and alleviates the time pressure faced by multinational enterprises in preparing financial statements, enterprises should take note that, if the figures in the audited CFC financial statements or those confirmed by the tax authorities differ from the self-assessed earnings, the trustee should still be urged to file a declaration for correction.

Given the global trend toward increased transparency and the introduction of new anti-tax avoidance regulations across jurisdictions, enterprises are advised to engage professional advisors for proactive planning to properly adjust the structure of offshore companies and offshore assets.