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Tax Reform – Specified Foreign Corporations and Importance for Americans Abroad

Who is Affected:

Under the Law H.R. 1 originally known as the “Tax Cuts and Jobs Act”, U.S. persons  (citizens, resident aliens, and domestic corporations) with 10% or higher stock ownership in Specified Foreign Corporations (SFC) are subject to “deemed repatriation” tax.

Which foreign corporations are SFC:

1. All Controlled Foreign Corporations (CFC). A CFC is any foreign corporation in which more than 50% of the total value of the stock is owned directly, indirectly or constructively by U.S. shareholders on any day during the taxable year of the corporation. This means that foreign corporation in which one or more US persons hold more than 50% of stock is a CFC, thus it is also a SFC (except for PFIC corporations explained below).


2. Any foreign corporation, which has a U.S. corporate shareholder.This means that non-CFC is not a SFC unless one of the U.S. shareholders is a U.S. business that owns at least 10% of the foreign corporation.

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