CONTROLLLED FOREIGN COMPANIES (CFC) — Companies, usually located in low tax jurisdictions, that are controlled by a resident shareholder. CFC legislation is usually designed to combat the sheltering of profits in companies resident in low- or no-tax jurisdictions. An essential feature of such regimes is that they attribute a proportion of the income sheltered in such companies to the shareholder resident in the country concerned. Generally, only certain types of income fall within the scope of CFC legislation, i.e. passive income such as dividends, interest and royalties.
Source: OECD Glossary of Tax Terms http://www.oecd.org/ctp/glossaryoftaxterms.htm