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The emergence of multinational companies (MNC), as the impact of increasingly globalized world’s economic system and changes to tax regulations that are not in line with the globalization development, has given opportunity to MNC to perform international tax avoidance. One of the tax avoidance practices done by MNC is establishing CFC (Controlled Foreign Companies) for avoiding domestic tax imposition. The rampant issue of CFC establishment for tax avoidance has resulted in the OECD and G20 making BEPS (Base Erosion and Profit Shifting) Action Plan 3 containing recommendations for the strengthening of CFC rules. This Action Plan was expected to be adopted by all member states including Indonesia. As follow-up to it, Indonesia has issued new CFC rules as set out in Regulation of the Minister of Finance number: PMK No.107/PMK.03/2017, dated July 27, 2017. Similar to Indonesia, China also has CFC rules in the effort of preventing tax avoidance practices. This research was aimed at comparing the CFC rules in Indonesia with the CFC rules in China seen from the aspect of type of control, the aspect of shareholding limit in determining joint ownership with other resident taxpayers, the aspect of definition of low tax jurisdiction, and the aspect of exemption. This research used qualitative approach with descriptive research type. Data collecting methods used were literature study and field study through in-depth interview with related stakeholders. The research result shows that compared to China, the CFC rules in Indonesia still have weaknesses seen from 4 aspects, namely the aspect of type of control, the aspect of shareholding limit in determining joint ownership with other resident taxpayers, the aspect of definition of low tax jurisdiction, and the aspect of exemption. To render the CFC rules in Indonesia effective and efficient in preventing tax avoidance, the weaknesses of the CFC rules can be remedied by way of applying control test that is not only based upon legal control in the form of shares, making shareholding limit in determining joint ownership with other resident taxpayers, making definition of low tax jurisdiction, applying genuine economic exemption and motive exemption.

Analysis on CFC Rules In Indonesia And China As Well As BPEPS Action Plan 3 In The Effort of Strengthening CFC Rules In Indonesia