Controlled foreign company rules

The controlled foreign company rules are contained in Part X of the ITAA 1936 and are designed to tax Australian resident shareholders who control foreign companies on 'tainted' income earned by the foreign companies.

Australian residents are required to include the tainted income in their assessable income in the same income year that the tainted income was derived by the foreign companies.

Tainted income is income which is mobile and able to be readily diverted to low tax jurisdictions, such as dividends, interest, some royalties and some income from intra-group transactions.

    Last modified: 21 Feb 2012QC 25356