Press Release: Taxation: Commission requests UK to further amend its treatment of controlled foreign corporations (CFCs)

The European Commission has formally requested the United Kingdom to amend its legislation to better take into account the rulings of the EU's Court of Justice on the tax treatment of controlled foreign corporations (CFCs). Despite the 2006 Court's ruling in the Cadbury Schweppes case, the UK is still not complying with EU law on freedom of establishment and free movement of capital. In particular, the UK continues to tax in the UK profits of subsidiaries established in the EU or in Member States of the European Economic Area (EEA). Under EU law, profits of CFCs - which are subsidiaries of companies established in EU Member States or in EEA countries - should not be subject to additional taxation in the country of the parent company if the subsidiaries are engaged in genuine economic activities.