The arm’s length principle (ALP) is the cornerstone of multinational enterprises’ (MNEs) profit taxation. However, despite extensive improvements by the OECD’s Base Erosion and Profit Shifting (BEPS) Project, two aspects of the ALP has been widely criticized. First, market jurisdictions...

This chapter provides a description of one of the key anti-tax-avoidance rules to combat profit shifting by multinational corporations, so called Controlled Foreign Corporation (CFC) rules that directly target income in low-tax countries. We explain some key institutional features of CFC...