A foreign entity is considered a Controlled Foreign Company (CFC) when the Spanish taxpayer, either alone or together with its associated enterprises, holds, directly or indirectly, at least 50 percent of capital, voting rights, or entitlement to profits of that entity. In addition, the effective corporate tax paid on its profits is lower than 75 percent of the corporate income tax that would have been payable under the Spanish corporate income tax regime.

As an additional condition, the CFC regime generally does not apply when the foreign entity carries on genuine economic activities supported by adequate personnel, assets, and premises.