The Ministry of Finance (MoF) on 3 March 2017, published Guidance Letter No. 03-12-11/3/5790 of 3 February 2017, clarifying the taxation of CFC profits in determining the corporate tax base of a consolidated tax group (CTG).
According to article 278.1, section 1 of the Tax Code (TC), the Ministry of Finance stated that the corporate tax base of a CTG is the sum of all income received by the members of the CTG, reduced by all expenses incurred by them. The MoF held that the provisions of article 278.1 of the TC apply exclusively in the course of determining the tax base of a CTG, which is subject to corporate income tax at the standard rate of 20%, as stipulated under article 284, section 1 of the TC.
However, the provisions of article 284, section 1 of the TC do not apply to income received by the members of the CTG from their controlled foreign companies (CFC).
Hence, the Ministry of Finance ruled that the consolidated tax base of a consolidated tax group does not include CFC profits of the members of the consolidated tax group.
