In our newsletter from December 16, 2013 (No. 17), we elaborated on the expected legislative changes from January 1, 2014 on the subject of a CFC a FVC. The main changes are as follows:

– The corporate tax rate in the foreign country that constitutes a criterion for the determination of a CFC has been reduced from 20% to 15%;

– A change in the manner of measuring the taxable income, so that under the CFC regime exempt capital gains and exempt dividends will also be included, such as income treated under the regime of the participation exemption, and  expenses which are not included in the financial statements (deemed expenses) will not be taken into account.

– The deemed credit system for the taxation of the deemed dividend has been cancelled.

– A change in the taxation system regarding to a FVC to the effect that the taxpayer for the FVC's income will be the controlling shareholder and not the company itself, like in the CFC regime ,with certain adjustments that relate to the tax rates and the two-stage taxation method.

We would like to update that the aforesaid legislation has been finally accepted and came into force from January 1, 2014.