The CFC group finance exemption: EC’s final decision

The group financing exemption in TIOPA 2010 Part 9A Chapter 9 involves unlawful state aid, according to the European Commission’s final decision. The non-trading finance profits (NTFP) exemptions give an advantage to controlled foreign companies (CFCs) earning NTFP from qualifying loan relationships, as these exemptions are not available for upstream or third-party loans. In a three-stage test, the Commission considered: the selection of the appropriate reference system; the group financing exemption as a derogation from the general CFC regime; and whether the group financing exemption is justified. The Commission has given the UK only two months to identify the beneficiaries of the aid, determine the amount of the aid in each case, and order repayment of those amounts, and only four months to complete full recovery of the aid.