Summary
The branch profits tax is an additional US federal income tax imposed on the earnings and profits (hereafter referred to simply as "earnings") of a US trade or business that are repatriated to the Canadian corporation instead of being reinvested in the US trade or business. The purpose of the tax is to treat a US trade or business held by a Canadian (or any other non-US) corporation in the same way as if the US trade or business were held by a US subsidiary of the Canadian corporation.
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Extract
Avoiding Branch Profits Tax
Any Canadian corporation with a trade or business in the United States should be aware of the US branch profits tax, which is a tax in addition to the regular US federal income tax (and any applicable state tax). The US branch profits tax only applies to US business operations held directly in branch form, which is why most Canadian corporations hold their US business operations in US corporations. However, for those Canadian corporations that do operate in branch form-or through a limited liability company (LLC) that has not elected to be treated...
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