Controlled Foreign Companies

A controlled foreign company (CFC), in simple terms, means any foreign company which is directly/indirectly held by one or more South African residents. The net income of a CFC may be included in the income of such South African shareholders even if no income is repatriated back to the South African shareholder. CFC legislation is rather complex, and it can be difficult to ascertain what should or should not be attributed to back the shareholder. In addition, when the shareholder submits its tax return it needs to submit an IT10B, which basically checks if any income is taxed in the shareholders hands. BDO can assist in preparing CFC IT10B returns and advise on the many exclusions and exemptions available to South African residents under the CFC regime.